<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): May 2, 1995
IN HOME HEALTH, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Minnesota 33-17228C 41-1458213
- ------------------------------ ----------------- -----------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
Carlson Center, Suite 500
601 Lakeshore Parkway
Minnetonka, Minnesota 55305-5214
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 449-7500
<PAGE>
Item 5. OTHER EVENTS.
On May 2, 1995 In Home Health, Inc. entered into a Securities Purchase
and Sale Agreement with Manor Healthcare Corp.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
10.1 Securities Purchase and Sale Agreement between In Home Health, Inc.
and Manor Healthcare Corp. dated May 2, 1995.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IN HOME HEALTH, INC.
by /s/ Kenneth J. Figge
--------------------------------
Kenneth J. Figge
Executive Vice President
Dated: May 3, 1995
3
<PAGE>
- --------------------------------------------------------------------------------
______________________________________
SECURITIES PURCHASE AND SALE AGREEMENT
______________________________________
Between
IN HOME HEALTH, INC.
and
MANOR HEALTHCARE CORP.
__________
Dated as of May 2, 1995
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
1. Definitions; Certain References................................ 3
1.1 Definitions............................................. 3
2. Closing........................................................ 6
2.1 Time and Place of the Closing........................... 6
2.2 Transactions at the Closing............................. 7
3. Conditions to the Execution of This Agreement.................. 7
3(a) Resignation of Directors..................... 7
3(b) Installation of New Directors................ 7
3(c) Directors' Resolutions....................... 8
3(d) Opinion of Seller's Counsel.................. 8
3(e) Employment Agreements........................ 9
4. Conditions to the Closing...................................... 9
4.1 Conditions Precedent to the Obligations
of Each Party......................................... 9
4.1(a) Seller Shareholder Approval.................. 9
4.1(b) No Order .................................... 9
4.1(c) Hart-Scott-Rodino............................ 10
4.1(d) Articles of Incorporation
Amendment.................................. 10
4.1(e) Consents and Permits......................... 10
4.1(f) Consummation of the Issuer
Self-Tender................................ 10
4.1(g) Determination of Finder's Fee................ 11
4.1(h) Lender Consents.............................. 11
4.2 Conditions Precedent to the
Obligations of the Purchaser.......................... 11
4.2(a) Compliance by the Seller..................... 12
4.2(b) No Legal Action.............................. 12
4.2(c) Legal Opinion................................ 12
4.2(d) Delivery of the Transaction
Documents and Securities,
Etc........................................ 12
4.2(e) No Material Adverse Effect................... 13
4.2(f) Appointment of Directors..................... 13
4.3 Conditions Precedent to Obligations of
the Seller............................................ 13
4.3(a) Compliance by the Purchaser.................. 13
4.3(b) No Legal Action.............................. 14
4.3(c) Legal Opinions............................... 14
4.3(d) Delivery of the Transaction
Documents, Etc............................. 14
5. Representations and Warranties of
the Seller ............................................. 14
5.1 Organization, Good Standing, Power,
Authority, Etc........................................ 14
-i-
<PAGE>
Section Page
- ------- ----
5.2 Capitalization, Etc..................................... 15
5.3 Title to Shares Acquired in Issuer
Self-Tender........................................... 16
5.4 Registration Rights..................................... 17
5.5 Proxy Statement and Issuer Tender Offer
Documents; SEC Documents.............................. 17
5.6 Authority and Qualification of the Seller............... 17
5.7 No Subsidiaries......................................... 17
5.8 No Contravention, Conflict, Breach, Etc................. 17
5.9 Consents................................................ 18
5.10 No Existing Violation, Default, Etc..................... 19
5.11 Licenses and Permits.................................... 19
5.12 Trademarks.............................................. 20
5.13 Title to Properties..................................... 20
5.14 Environmental Matters................................... 21
5.15 Taxes................................................... 22
5.16 Litigation.............................................. 23
5.17 Labor Matters........................................... 23
5.18 Contracts............................................... 24
5.19 Finder's Fees........................................... 24
5.20 Financial Statements.................................... 24
5.21 No Material Adverse Change.............................. 25
5.22 Investment Company...................................... 25
5.23 Contingent Liabilities.................................. 25
5.24 No Change of Control Puts............................... 26
5.25 Exemption from Registration; Restrictions
on Offer and Sale of Same or Similar
Securities............................................ 26
5.26 ERISA................................................... 26
5.27 Securities.............................................. 28
5.28 No Material Misstatement................................ 28
5.29 Insurance Coverage...................................... 29
5.30 Third-Party Payment..................................... 29
6. Representations and Warranties of
the Purchaser................................................ 30
6.1 Organization, Good Standing,
Power, Authority, Etc................................. 30
6.2 No Conflicts; No Consents............................... 31
6.3 Purchase for Investment................................. 31
6.4 Financial Statements.................................... 31
6.5 Finder's Fees........................................... 32
6.6 Provision of Information................................ 32
7. Covenants of the Parties....................................... 32
7.1 Restriction on Transfer................................. 32
7.2 Certificates for Securities, Conversion
Shares and Warrant Shares to
Bear Legends.......................................... 33
-ii-
<PAGE>
Section Page
- ------- ----
7.3 Removal of Legends...................................... 34
7.4 Pre-Closing Activities.................................. 34
7.5 Information............................................. 34
7.6 Further Assurances...................................... 34
7.7 Shareholders' Meeting; Proxy Statement
and Issuer Tender Offer Documents..................... 35
7.8 Hart-Scott-Rodino....................................... 35
7.9 Acquisition Proposals................................... 36
7.10 Access.................................................. 37
7.11 Publicity............................................... 37
7.12 Reservation of Shares; Compliance with
Law upon Issuance of Conversion
Shares or Warrant Shares; Listing..................... 38
7.13 Conduct of Business by the Seller
Pending the Closing................................... 38
7.14 Notice of Certain Events................................ 40
7.15 Location of Corporate Headquarters...................... 42
7.16 Continuing Reporting Company............................ 42
7.17 Scope of Business....................................... 42
7.18 Employment Agreements................................... 42
7.19 Future Arrangements..................................... 43
7.20 Chief Executive Officer................................. 43
8. Termination.................................................... 43
9. Survival of Representations
and Warranties............................................... 45
10. Successors and Assigns......................................... 45
11. Indemnity...................................................... 46
12. Miscellaneous.................................................. 47
12.1 Notices................................................. 47
12.2 Expenses................................................ 48
12.3 Remedies................................................ 48
12.4 Governing Law; Consent to Jurisdiction;
Waiver of Jury Trial.................................. 49
12.5 Severability; Interpretation............................ 49
12.6 Headings................................................ 50
12.7 Entire Agreement........................................ 50
12.8 Counterparts............................................ 50
12.9 Modification or Amendment............................... 50
12.10 Waiver.................................................. 50
Signatures ........................................................ 51
-iii-
<PAGE>
Exhibits
- --------
A - Form of Warrant
B - Form of Certificate of Designation of Convertible
Preferred Stock
C - Articles of Incorporation of the Seller
C-1 - Form of Articles of Incorporation Amendment
D - Employment Agreement for Judy M. Figge
E - Employment Agreement for Kenneth J. Figge
F - Form of Registration Rights Agreement
G - Form of Resolution Adopted by the Directors
of the Seller
H - Form of Employment Agreement for James J. Lynn
I - Form of Opinion of Lindquist & Vennum, counsel to
the Seller
J - Form of Opinion of Cahill Gordon & Reindel, counsel
to the Purchaser
K - By-Laws of the Seller
K-1 - Form of Amendment of the By-Laws of the Seller
L - Form of Employment Agreement for Cathy R. Reeves
M - Form of Employment Agreement for Margaret L. Maxon
Schedules
- ---------
3(b) - Purchaser Director Designees
5.2 - Capitalization
5.8(a) - Compensation and Benefit Plans
5.8(b) - Material Contracts
5.9 - Consents
5.11 - Licenses
5.12 - Trademark Exceptions
5.13 - Material Encumbrances
5.15 - Taxes
5.16 - Litigation
5.21 - Material Adverse Effect
5.29 - Insurance Policies
5.30 - Schedules of Medicare and Medicaid Disputes
7.13 - Conduct of Business Exceptions
-iv-
<PAGE>
SECURITIES PURCHASE AND SALE AGREEMENT
SECURITIES PURCHASE AND SALE AGREEMENT ("AGREEMENT") dated as of
May 2, 1995, between IN HOME HEALTH, INC., a Minnesota corporation (the
"SELLER"), and MANOR HEALTHCARE CORP., a Delaware corporation (the
"PURCHASER").
WHEREAS, the Seller desires to sell to the Purchaser and the
Purchaser desires to purchase from the Seller (i) an aggregate of 6,440,000
shares (the "SHARES") of common stock, par value $.01, of the Seller (the
"COMMON STOCK"), (ii) a warrant, in the form of EXHIBIT A attached hereto,
to purchase initially an aggregate of 6,000,000 shares of Common Stock (the
"WARRANT") and (iii) an aggregate of 200,000 shares of convertible preferred
stock having an aggregate liquidation preference of $20,000,000 (the "PREFERRED
STOCK"), to be established pursuant to a Certificate of Designation of
Convertible Preferred Stock in the form of EXHIBIT B attached hereto, for the
consideration and upon the terms and subject to the conditions set forth herein
(the purchase of the securities described in (i), (ii) and (iii) above are
herein referred to as the "INVESTMENT"); and
WHEREAS, the Board of Directors of the Seller has determined that
the Investment on the terms and conditions contained in this Agreement, and each
of the other transactions contemplated herein, are consistent with and in
furtherance of the long-term business strategy of the Seller and are fair to,
and in the best interests of, the Seller and its shareholders and has approved
and adopted this Agreement and each of the other transactions contemplated
herein and intends to recommend the approval and adoption of this Agreement and
the Investment by the shareholders of the Seller as well as the amendment to the
Seller's Articles of Incorporation referred to herein; and
WHEREAS, the Board of Directors of the Seller duly formed, in
accordance with the requirements of Section 302A.673 (Subdivision 1, paragraph
(d)) of the Minnesota Business Corporation Act (the "MINNESOTA BCA") and
Section 302A.675 (Subdivision 2) of the Minnesota BCA, a committee of
disinterested directors (as defined in Section 302A.673 (Subdivision 1,
paragraph (d)(3)) of the Minnesota BCA) (the "COMMITTEE") to evaluate the
Investment, this Agreement and the transactions contemplated herein, and said
Committee has approved the Investment, this Agreement and the transactions
contemplated herein prior to the date hereof for purposes of each of Section
302A.673 (Subdivision 1, paragraph (a)) and Section 302A.675 (Subdivision 2) of
the Minnesota BCA; PROVIDED, HOWEVER, that the Investment, this Agreement
and the transactions contemplated herein, including the Issuer Self-Tender (as
defined in
<PAGE>
-2-
Section 1.1 hereof), do not constitute a "takeover offer" within the meaning of
Section 302A.011 (Subdivision 53) of the Minnesota BCA and that, therefore, the
approval of the Investment, this Agreement and the transactions contemplated
herein by the Committee as it relates to Section 302A.675 (Subdivision 2) of the
Minnesota BCA is not legally required for the provisions of Section 302A.675
(Subdivision 1) of the Minnesota BCA to be inapplicable to the Purchaser; and
WHEREAS, (i) the Investment, this Agreement and the transactions
contemplated herein, including the Issuer SelfTender, do not constitute a
"control share acquisition" within the meaning of Section 302A.011 (Subdivision
38) of the Minnesota BCA, (ii) Section 302A.671 of the Minnesota BCA is not
applicable to the Investment and the transactions contemplated herein, (iii)
upon the Closing, the Purchaser will beneficially own capital stock of the
Seller having voting power in the election of directors of over fifty percent
(50%) and, therefore, any subsequent purchase of shares of Common Stock by the
Purchaser (so long as it shall have continually beneficially owned capital stock
of the Seller having voting power in the election of directors of over fifty
percent (50%)) will not be subject to Section 302A.671 of the Minnesota BCA and
(iv) if subclauses (i), (ii) and (iii) above were found to be incorrect by a
court of competent jurisdiction, the approval by the shareholders of the Seller
of this Agreement and the Investment (the "SELLER SHAREHOLDER APPROVAL") shall
constitute approval of a control share acquisition of capital stock of the
Seller having voting power in the election of directors of over fifty percent
(50%) as contemplated by Section 302A.671 (Subdivision 2, paragraph (d)(3)) of
the Minnesota BCA, and such approval shall mean that all shares of Preferred
Stock and all shares of Common Stock acquired in the Investment, whether, in the
case of shares of Common Stock, immediately at the Closing or upon conversion of
the Preferred Stock or exercise of the Warrants (including any increase in the
number of shares pursuant to the anti-dilution provisions thereof), (i) shall be
accorded in the case of the Preferred Stock, the voting rights set forth in the
Preferred Stock Designation and, in the case of the Common Stock, the same
voting rights as all other shares of Common Stock, in each case as contemplated
by Section 302A.671 (Subdivision 4a, paragraph (a)) of the Minnesota BCA and
(ii) shall not be subject to redemption pursuant to Section 302A.671
(Subdivision 6) of the Minnesota BCA.
NOW, THEREFORE, in consideration of the premises and of the
respective representations, warranties, covenants,
<PAGE>
-3-
agreements and conditions contained herein, the Seller and the Purchaser agree
as follows:
1. DEFINITIONS; CERTAIN REFERENCES.
1.1 DEFINITIONS. (a) The terms defined in this Section 1.1,
whenever used in this Agreement, shall have the following meanings for all
purposes of this Agreement.
"ACT" means the Securities Act of 1933, as amended and the rules
and regulations thereunder.
"AFFILIATE" means, with respect to any person or entity, (i) any
person or entity that is at the time in question, directly or indirectly, in
control of, or controlled by, or under common control with, such person or
entity (as the term "control" is defined in Rule 12b-2 under the Exchange Act)
and (ii) any person or entity acting in such a manner with such person or entity
or any Affiliate thereof as would constitute them a "person" within the meaning
of Section 14(d)(2) of the Exchange Act.
"ARTICLES OF INCORPORATION" means the articles of incorporation of
the Seller on file with the Secretary of State of the State of Minnesota, a true
and correct copy of which is attached hereto as EXHIBIT C.
"ARTICLES OF INCORPORATION AMENDMENT" means the amendment to
Article III of the Articles of Incorporation as set forth in EXHIBIT C-1
attached hereto.
"CONVERSION SHARES" means the shares of Common Stock issuable or
issued upon conversion of the Preferred Stock pursuant to the terms of this
Agreement and the Preferred Stock Designation.
"EMPLOYMENT AGREEMENTS" means, collectively, the employment
agreements between the Seller and (i) Judy M. Figge in the form of EXHIBIT D
attached hereto, (ii) Kenneth J. Figge in the form of EXHIBIT E attached
hereto, (iii) James J. Lynn in the form of EXHIBIT H attached hereto, (iv)
Cathy R. Reeves in the form of EXHIBIT L attached hereto and (v) Margaret L.
Maxon in the form of EXHIBIT M attached hereto.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended and the rules and regulations thereunder.
<PAGE>
-4-
"ISSUER SELF-TENDER" means the tender offer by the Seller for
6,440,000 shares of the Common Stock pursuant to the Issuer Tender Offer
Documents at a purchase price of $3.40 per share net to the sellers thereof in
cash.
"ISSUER TENDER OFFER DOCUMENTS" means all documents required to be
filed under the Exchange Act and any applicable state law, including, without
limitation, a Schedule 13E-4 filed under the Exchange Act, in connection with
the Issuer Self Tender; and "ISSUER TENDER OFFER DOCUMENT" means any one such
document.
"MATERIAL ADVERSE EFFECT" means, with respect to any event,
occurrence, failure of event or occurrence, change, state of affairs, breach,
default, violation, fine, penalty or failure to comply (each, a
"CIRCUMSTANCE"), individually or taken together with all other circumstances
contemplated by or in connection with any or all of the representations and
warranties made in this Agreement, a reduction in the carrying value of assets
or an increase in the carrying value of liabilities of the Seller, a decrease in
the Seller's stockholders' equity, the creation or increase of a loss
contingency (as that term is defined in Statement of Financial Accounting
Standards No. 5), a negative adjustment to the Seller's results of operations
historically or prospectively or the reduction in the value of any agreement to
the Seller of, in each case, $350,000 or more.
"PREFERRED STOCK DESIGNATION" means the certificate of designation
adopted by the Board of Directors of the Seller designating the Preferred Stock
in the form of EXHIBIT B attached hereto.
"PROXY STATEMENT" means the proxy statement with respect to this
Agreement, the Investment, the Articles of Incorporation Amendment and the other
transactions contemplated by this Agreement, including pursuant to the other
Transaction Documents and the Issuer Tender Offer Documents sent to the holders
of the Common Stock in compliance with the Exchange Act, and including the
information required by Rule 14f-1 under the Exchange Act, as the same may be
amended or supplemented in accordance herewith.
"REGISTRABLE SECURITIES" means the Shares, the Conversion Shares
and the Warrant Shares and any other securities issued or issuable (including as
a result of the operation of "anti-dilution adjustment" provisions in the
Preferred Stock and the Warrant) with respect to the Shares, the Conversion
<PAGE>
-5-
Shares or the Warrant Shares by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or pursuant to a dividend, distribution or issuance of
other assets or securities; PROVIDED, HOWEVER, that a security ceases to be
a Registrable Security when it is no longer a Restricted Security.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement covering the Registrable Securities by and between the Seller and the
Purchaser in the form of EXHIBIT F attached hereto, as amended, supplemented
and modified from time to time in accordance with the terms thereof.
"RESTRICTED SECURITY" means any Registrable Security until such
Registrable Security (i) has been effectively registered under the Act and
disposed of by the Purchaser or any other holder in accordance with a
registration statement filed under the Act covering such disposition by the
Purchaser or such holder or (ii) is distributed to the public pursuant to Rule
144 under the Act.
"SEC" means the Securities and Exchange Commission.
"SEC DOCUMENTS" means all documents filed by the Seller with the
SEC.
"SECURITIES" means the Shares, the Warrant and the Preferred
Stock.
"SUBSIDIARY" means any corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or other entity analogous to any of the foregoing
of which a majority of the equity ownership (whether voting stock, or comparable
interest) is, at the time, owned, directly or indirectly by the Seller.
"TRANSACTION DOCUMENTS" means this Agreement, the Employment
Agreements, the Preferred Stock Designation, the Registration Rights Agreement
and the Warrant.
"WARRANT SHARES" means the shares of Common Stock issuable or
issued upon exercise of the Warrant pursuant to the terms of this Agreement and
the Warrant.
(b) In addition, the following terms shall have the meanings set
forth in the Sections set forth below opposite such terms:
<PAGE>
-6-
Defined Terms Section
------------- -------
Acquisition Proposal.................................. 7.9
Agreement............................................. First Paragraph
Board Increase........................................ 4.1(c)
Closing............................................... 2.1
Closing Date.......................................... 2.1
Committee............................................. Recitals
Common Stock.......................................... Recitals
Compensation and Benefit Plans........................ 5.8
Consents.............................................. 4.1(e)
Contracts............................................. 5.8
Encumbrances.......................................... 5.3
Environmental Laws.................................... 5.14
ERISA................................................. 5.26
HSR Act............................................... 4.1(c)
Indemnified Person.................................... 11
Investment............................................ Recitals
Licenses.............................................. 5.11
Losses................................................ 11
Minnesota BCA......................................... Recitals
Option Plan........................................... 5.2
Option Plans.......................................... 5.2
Preferred Stock....................................... Recitals
Programs.............................................. 5.30
Purchase Price........................................ 2.2
Purchaser............................................. First Paragraph
Purchaser Indemnified Matter.......................... 11
Purchaser Indemnified Person.......................... 11
Representatives....................................... 7.10
Seller................................................ First Paragraph
Seller Indemnified Matter............................. 11
Seller Indemnified Person............................. 11
Seller Shareholder Approval........................... Recitals
Shares................................................ Recitals
Stock Options......................................... 5.2
Trademarks............................................ 5.12
Warrant............................................... Recitals
2. CLOSING.
2.1 TIME AND PLACE OF THE CLOSING. The transactions described in
Section 2.2 shall occur at a closing (the "CLOSING") which shall take place at
the offices of Lindquist & Vennum, 4200 IDS Center, 80 South Eighth Street,
Minneapolis, Minnesota on the second business day following the first date on
which all of the conditions to Closing set forth in Section 4 (other than the
conditions set forth in Sections 4.2(c),
<PAGE>
-7-
(d)(i)-(iii) and (f) and 4.3(c) and (d), which shall be satisfied at the
Closing) hereof have first been satisfied or waived in accordance with the terms
of this Agreement, or at such other place and time as the Seller and the
Purchaser shall agree upon. The "CLOSING DATE" shall be the date the Closing
occurs.
2.2 TRANSACTIONS AT THE CLOSING. At the Closing, subject to the
terms and conditions of this Agreement, the Seller shall issue and sell to the
Purchaser, and the Purchaser shall purchase, the Securities. The purchase price
for the Securities (the "PURCHASE PRICE") shall, subject to Section 4.1(f),
aggregate $41,896,000, which is comprised of (i) $20,000,000 for the Preferred
Stock and the Warrant and (ii) $21,896,000 for the Shares. At the Closing, the
Seller shall deliver to the Purchaser (i) a certificate or certificates for the
Shares, (ii) a certificate for the Warrant and (iii) a certificate or
certificates for the Preferred Stock, each in the names, amounts and
denominations previously provided to the Seller by the Purchaser against payment
by the Purchaser of the Purchase Price by wire transfer at the Closing of
federal (same day) funds to an account designated by the Seller.
3. CONDITIONS TO THE EXECUTION OF THIS AGREEMENT. This
Agreement shall not be executed until the following conditions are satisfied
(unless expressly waived in writing by the Purchaser):
(a) RESIGNATION OF DIRECTORS. The Seller shall have provided to
the Purchaser letters of resignation, addressed to the Seller (and
expressly providing that the Purchaser may rely on such letters) in form
and substance satisfactory to the Purchaser and effective immediately upon
consummation of the Closing, from S. Marcus Finkle and Sheldon Lieberbaum,
each of whom is a member of the current Board of Directors of the Seller.
(b) INSTALLATION OF NEW DIRECTORS. The Purchaser shall have
received resolutions of the Board of Directors of the Seller in the form of
EXHIBIT G attached hereto to the effect that each of them will take any
action necessary to effect the appointment to the Board of Directors of the
Seller, immediately upon consummation of the Closing, of the four nominees
of the Purchaser specified on SCHEDULE 3(b) attached hereto or for such
other nominees in lieu of any thereof as may otherwise be specified by the
Purchaser in writing prior to the Closing Date and
<PAGE>
-8-
agreed to by the Seller, and to the effect that such resolution shall not
be rescinded, modified or waived without the prior written approval of the
Purchaser.
(c) DIRECTORS' RESOLUTIONS. The Purchaser shall have received
resolutions of the Board of Directors of the Seller, certified by the
Secretary of the Seller, in form and substance satisfactory to the
Purchaser and evidencing (i) the due authorization of the execution and
delivery of this Agreement and the other Transaction Documents, the
Investment, the issuance of the Securities, the Conversion Shares and the
Warrant Shares and the transactions contemplated hereby and thereby, and
(ii) approval of the Articles of Incorporation Amendment, the increase of
the size of the Seller's Board of Directors to seven members effective on
the Closing Date (the "BOARD INCREASE"), and the amendment of the by-laws
of the Seller in the form of EXHIBIT K-1 attached hereto. The Purchaser
shall also have received certified resolutions of the Committee in form and
substance satisfactory to the Purchaser evidencing the due authorization of
this Agreement and the Investment.
(d) OPINION OF SELLER'S COUNSEL. The Purchaser shall have received
an opinion of Lindquist & Vennum, counsel for the Seller, addressed to the
Purchaser and in form and substance satisfactory to the Purchaser (i) to
the effect of subclauses (i), (ii) and (iii) in the final Recital of this
Agreement, and as to the accuracy of subclause (iv) of such Recital, (ii)
to the effect that the approval of the shareholders pursuant to the Proxy
Statement of the Seller of the Articles of Incorporation Amendment shall,
upon the filing of an appropriate amendment to the Articles of
Incorporation, effectuate the Articles of Incorporation Amendment, (iii) as
to the approval and authorization by the Board of Directors of this
Agreement and the other Transaction Documents, the Investment, the issuance
of the Securities, the Issuer Self-Tender and the related transactions
contemplated herein (subject to obtaining the Seller Shareholder Approval),
(iv) as to the Board Increase on the Closing Date and (v) as to the
approval of this Agreement and the Investment by the Committee and to the
effect that such approval shall have the legal effect described in
the penultimate Recital of this Agreement.
<PAGE>
-9-
(e) EMPLOYMENT AGREEMENTS. The Employment Agreements set forth as
Exhibits D and E attached hereto shall have been executed concurrently with
the execution of this Agreement.
4. CONDITIONS TO THE CLOSING.
4.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY. The
respective obligations of the Purchaser and the Seller to be discharged under
this Agreement on or prior to the Closing Date are subject to satisfaction of
the following conditions at or prior to the Closing Date (unless expressly
waived in writing by the Purchaser and the Seller, to the extent permitted by
applicable law, at or prior to the Closing Date):
(a) SELLER SHAREHOLDER APPROVAL. This Agreement, the Investment,
the Articles of Incorporation Amendment and an amendment to the Company's
1995 Stock Option Plan shall have been approved and adopted by the
requisite vote of the shareholders of the Seller in accordance with all
state and federal law, including the Minnesota BCA, and such approval shall
(i) constitute the Seller Shareholder Approval having the legal effects
described in the final Recital of this Agreement, (ii) satisfy the
shareholder approval requirements of the Nasdaq National Market and (iii)
subject to filing of an appropriate amendment to the Articles of
Incorporation, effectuate the Articles of Incorporation Amendment.
(b) NO ORDER. No governmental or regulatory authority or federal
or state court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the
Investment or the other transactions contemplated hereby or any portion of
it illegal or otherwise prohibiting consummation of all or any portion of
the Investment or the other transactions contemplated hereby or which has
the effect of placing any limitations or restrictions (other than those
contemplated by Section 7.1 hereof) on the ability of the Purchaser to (i)
vote, dispose of, retain or otherwise act in respect of any of the
Securities, the Conversion Shares or the Warrant Shares (other than
restrictions imposed by the federal and state securities laws) or (ii)
enter into any arrangement or transaction with the Seller or any of its
<PAGE>
-10-
subsidiaries after the acquisition of the Securities, the Conversion Shares
or the Warrant Shares.
(c) HART-SCOTT-RODINO. The applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT") with
respect to the transactions contemplated by this Agreement shall have
expired or been terminated.
(d) ARTICLES OF INCORPORATION AMENDMENT. An amendment to the
Articles of Incorporation of the Seller that satisfies the requirements of
Minnesota law effectuating the Articles of Incorporation Amendment shall
have been filed by the Seller with the Secretary of State of the State of
Minnesota and become effective on the Closing Date.
(e) CONSENTS AND PERMITS. The Seller shall have received all
consents, approvals, authorizations, orders, registrations, filings or
qualifications ("CONSENTS") of or with any (A) court or (B) governmental
agency or body or (C) other third party (whether acting in an individual,
fiduciary or other capacity) identified on SCHEDULE 5.9 attached hereto as
necessary to be obtained or made prior to the Closing Date in connection
with the transactions contemplated by this Agreement and the other
Transaction Documents, the Proxy Statement and the Issuer Tender Offer
Documents, including the issuance and sale of the Securities to the
Purchaser, and shall have provided the Purchaser evidence of the same in
form and substance satisfactory to the Purchaser.
(f) CONSUMMATION OF THE ISSUER SELF-TENDER. The Seller shall have,
with the Purchaser's prior written consent (which may not be withheld if
all other conditions to the Closing shall have been satisfied or validly
waived), accepted for purchase in the Issuer Self-Tender pursuant to the
Issuer Tender Offer Documents (without any waiver or modification of any
condition contained therein (unless expressly consented to in writing by
the Purchaser in its discretion)) an aggregate of 6,440,000 shares of
Common Stock at a cash purchase price of $3.40 per share; PROVIDED,
HOWEVER, that in the event that an amount of shares of Common Stock less
than or greater than 6,440,000 shares shall have been tendered in the
Issuer Self-Tender, the Purchaser and the Seller shall mutually determine
and agree upon whether the Seller shall accept for purchase such lesser
amount of shares of Common Stock or any por-
<PAGE>
-11-
tion of the amount of shares of Common Stock in excess of 6,440,000 shares
(in addition to the 6,440,000 shares) at a cash purchase price of $3.40 per
share in the Issuer Self-Tender, whereupon at the Closing the Purchaser
shall pay to the Seller in accordance with Section 2.2 an amount equal to
the aggregate cash consideration to be paid by the Seller in the Issuer
Self-Tender in lieu of the amount provided for in clause (ii) of the second
sentence of Section 2.2, and the aggregate Purchase Price for the
Securities referred to in such sentence shall be similarly adjusted so that
such aggregate Purchase Price will equal the sum of $20,000,000 plus the
amount to be paid at Closing in accordance with this proviso. Upon any
agreed upon determination by the Purchaser and the Seller in accordance
with the proviso in the preceding sentence, the Seller shall make
appropriate changes to the Issuer Tender Offer Documents and extend the
Issuer Self-Tender for the period required by applicable law. The
Purchaser and the Seller agree that the tendering of at least 5,635,000
shares of Common Stock in the Issuer Self-Tender shall be sufficient to
permit them to make the mutual determination and agreement contemplated by
the proviso in the second preceding sentence.
(g) DETERMINATION OF FINDER'S FEE. The aggregate fee payable to
Hambrecht & Quist Incorporated referred to in Section 5.19 shall have been
determined and agreed to by Hambrecht & Quist Incorporated and such fee
shall be satisfactory to each of the Purchaser and the Seller.
(h) LENDER CONSENTS. Manor Care, Inc. and the Purchaser shall have
obtained the consent of its lenders under that certain Competitive Advance
and Multi-Currency Revolving Credit Facility Agreement dated as of November
30, 1994 to a waiver of (i) the applicability of the covenants therein to
the Seller and (ii) any requirement that the Seller provide a guaranty of
the obligations under said credit facility.
4.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER.
The obligations of the Purchaser to be discharged under this Agreement on or
prior to the Closing Date are subject to satisfaction of the following
conditions at or prior to the Closing Date (unless expressly waived in writing
by the Purchaser, to the extent permitted by applicable law, at or prior to the
Closing Date):
<PAGE>
-12-
(a) COMPLIANCE BY THE SELLER. All of the terms, covenants and
conditions of this Agreement and the other Transaction Documents to be
complied with and performed by the Seller at or prior to the Closing Date
shall have been complied with and performed by it, and the representations
and warranties made by the Seller in this Agreement and in the other
Transaction Documents and in all exhibits, schedules, appendices and
attachments to any thereof shall be true and correct at and as of the
Closing Date, with the same force and effect as though such representations
and warranties had been made at and as of the Closing Date.
(b) NO LEGAL ACTION. No action, suit, investigation or other
proceeding that (i) relates to the transactions contemplated by this
Agreement or any other Transaction Document or by the Proxy Statement or
the Issuer Tender Offer Documents or (ii) could reasonably be expected to
have a Material Adverse Effect shall have been instituted before any court
or instituted or, to the knowledge of the Purchaser, threatened by any
governmental body which presents a risk, in the judgment of the Purchaser,
of a limitation on, or restraint or prohibition of, the transactions
contemplated by this Agreement, any other Transaction Document, the Proxy
Statement or the Issuer Tender Offer Documents or of the obtaining of
damages or other relief in connection therewith by the Purchaser.
(c) LEGAL OPINION. The Purchaser shall have received at and as of
the Closing Date a legal opinion of Lindquist & Vennum, counsel for the
Seller, dated the Closing Date addressed to the Purchaser and in form and
substance satisfactory to the Purchaser, substantially in the form of
EXHIBIT I attached hereto.
(d) DELIVERY OF THE TRANSACTION DOCUMENTS AND SECURITIES, ETC.
(i) The Seller shall have duly authorized, executed and delivered
each of the Transaction Documents (other than this Agreement).
(ii) The Seller shall have duly authorized, issued and delivered the
Securities.
(iii) The Seller shall have executed and delivered all such other
documents and certificates as the Purchaser shall reasonably request,
evidencing to the reasonable
<PAGE>
-13-
satisfaction of the Purchaser and its counsel such matters as the taking of
all necessary corporate action by the Seller in order to consummate the
transactions to be consummated by the Seller contemplated by the
Transaction Documents, the Proxy Statement and the Issuer Tender Offer
Documents.
(iv) The letters, the resolutions, legal opinion and Employment
Agreements attached as Exhibits D and E hereto referred to in Section 3
hereto shall not have been rescinded, modified or waived and shall remain
in full force and effect at the Closing Date.
(e) NO MATERIAL ADVERSE EFFECT. There shall not have occurred,
since September 30, 1994, any event, condition, change, occurrence or
circumstance, which has had or is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect and the Purchaser shall have
received a certificate signed by each of the Seller's chief executive
officer and chief financial officer (in their capacity as officers of the
Seller and not personally), dated the Closing Date, to the same effect as
well as certificates of the treasurer, controller and chief operating
officer (in their capacity as officers of the Seller and not personally) of
the Seller, dated the Closing Date, to the same effect with respect to
their respective areas of responsibility.
(f) APPOINTMENT OF DIRECTORS. There shall have been appointed to
the Board of Directors of the Seller, effective on the Closing Date, four
Directors chosen by the Purchaser in accordance with Section 3(b) hereof.
4.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER. The
obligations of the Seller to be discharged under this Agreement at or prior to
the Closing Date are subject to satisfaction of the following conditions at or
prior to the Closing Date (unless waived by the Seller, to the extent permitted
by applicable law, at or prior to the Closing Date):
(a) COMPLIANCE BY THE PURCHASER. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by the
Purchaser at or prior to the Closing shall have been complied with and
performed by it, and the representations and warranties made by the
Purchaser in this Agreement shall be true and correct at and as of the
Closing Date, with the same force and effect as
<PAGE>
-14-
though such representations and warranties had been made at and as of the
Closing Date.
(b) NO LEGAL ACTION. No action, suit, investigation or other
proceeding that relates to the transactions contemplated by this Agreement
and the other Transaction Documents, the Proxy Statement or the Issuer
Tender Offer Documents shall have been instituted before any court or
instituted or, to the knowledge of the Seller, threatened by any
governmental body which presents a risk, in the judgment of the Seller, of
a limitation on, or restraint or prohibition of, the transactions
contemplated by this Agreement, the other Transaction Documents, the Proxy
Statement or the Issuer Tender Offer Documents or of the obtaining of
damages or other relief in connection therewith.
(c) LEGAL OPINIONS. The Seller shall have received at and as of
such Closing Date legal opinions of Cahill Gordon & Reindel, counsel for
the Purchaser, and the General Counsel of Manor Care, Inc., dated the
Closing Date addressed to the Seller and in form and substance satisfactory
to the Seller, substantially in the form of EXHIBIT J attached hereto.
(d) DELIVERY OF THE TRANSACTION DOCUMENTS, ETC.
(i) The Purchaser shall have duly authorized, executed and delivered
each of the Transaction Documents (other than this Agreement) to which the
Purchaser is a party.
(ii) The Purchaser shall have executed and delivered all such other
documents and certificates as the Seller shall reasonably request,
evidencing to the reasonable satisfaction of the Seller and its counsel
such matters as the taking of all necessary corporate action by the
Purchaser in order to consummate the transactions to be consummated by the
Purchaser contemplated by the Transaction Documents.
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
hereby represents and warrants to the Purchaser on and as of the date hereof and
on and as of the Closing Date as follows:
5.1 ORGANIZATION, GOOD STANDING, POWER, AUTHORITY, ETC. The
Seller is a corporation duly organized, validly
<PAGE>
-15-
existing and in good standing under the laws of the State of Minnesota. The
Seller has the full corporate power and authority to execute and deliver this
Agreement and each other Transaction Document and, subject to obtaining Seller
Shareholder Approval, to perform in a full and timely manner each of its
obligations hereunder and thereunder and in respect of the Issuer Self-Tender.
The Seller has taken all action required by law, its Articles of Incorporation,
its by-laws or otherwise required to be taken by it to authorize the execution,
delivery and, subject to obtaining Seller Shareholder Approval, performance by
it of this Agreement and each other Transaction Document and in respect of the
Issuer Self-Tender. This Agreement has been duly executed and is, and upon
execution and delivery thereof at the Closing each of the other Transaction
Documents will be, a valid and binding obligation of the Seller. True and
complete copies of the Articles of Incorporation and the by-laws of the Seller
are attached hereto as EXHIBIT C and EXHIBIT K, respectively. No amendments
to the Articles of Incorporation or by-laws of the Seller have been authorized
other than the Articles of Incorporation Amendment (subject to approval of the
shareholders of the Seller) and the amendment to the by-laws set forth as
EXHIBIT K-1 attached hereto (which has been adopted by the Board of Directors
of the Seller to become effective at the Closing).
5.2 CAPITALIZATION, ETC. (a) The authorized capital stock of
the Seller consists of (i) 40,000,000 shares of Common Stock, of which as of the
date of this Agreement (1) 16,073,819 shares were issued and outstanding and (2)
1,803,850 shares were reserved for future issuance pursuant to outstanding stock
options ("STOCK OPTIONS") granted pursuant to the Seller's Stock Option Plan
of 1987, as amended, 1995 Stock Option Plan and Employee Stock Purchase Plan
(collectively, the "OPTION PLANS" and individually, an "OPTION PLAN"), and
such number includes 96,000 shares reserved for issuance upon exercise of
warrants to purchase the Seller's Common Stock at an exercise price of $6.00 per
share and which expire in January 1996; and (ii) 1,000,000 shares of preferred
stock, of which no shares are issued and outstanding. The Seller has no
treasury shares. Except as described in SCHEDULE 5.2 attached hereto, as of
the date of this Agreement, no shares of capital stock of the Seller are
reserved for any purpose. All outstanding shares of capital stock of, or other
equity interests in, the Seller have been duly authorized and validly issued and
are fully paid and nonassessable, and have not been issued in violation of (nor
are any of the authorized shares of capital stock of, or other equity interests
in, the Seller subject to) any preemptive or similar rights created by statute,
the
<PAGE>
-16-
charter or bylaws of the Seller, or any agreement to which the Seller is a party
or bound.
(b) Except as set forth in SCHEDULE 5.2 attached hereto, there
are no options, warrants or other rights (including registration rights),
agreements, arrangements or commitments of any character to which the Seller is
a party relating to the issued or unissued capital stock of the Seller or
obligating the Seller to grant, issue or sell any shares of the capital stock of
the Seller, by sale, lease, license or otherwise. There are no obligations,
contingent or otherwise, of the Seller to (i) repurchase, redeem or otherwise
acquire any shares of Common Stock (other than through the Issuer Self-Tender);
or (ii) provide funds to, or make any investment in (in the form of a loan,
capital contribution or otherwise), or provide any guarantee with respect to the
obligations of, any other person. The Seller (x) does not directly or
indirectly own, (y) has no agreements to purchase or otherwise acquire and (z)
does not hold any interest convertible into or exchangeable or exercisable for,
any capital stock of or other equity interest in any corporation, partnership,
joint venture or other business association or entity. Except as disclosed on
Schedule 5.8(a) attached hereto, there are no agreements, arrangements or
commitments of any character (contingent or otherwise) pursuant to which any
person is or may be entitled to receive any payment based on the revenues or
earnings, or calculated in accordance therewith, of the Seller. There are no
voting trusts, proxies or other agreements or understandings to which the Seller
is a party or by which the Seller is bound with respect to the voting of any
shares of capital stock of the Seller.
(c) The Seller has delivered to the Purchaser complete and correct
copies of each of the Option Plans, including all amendments thereto. SCHEDULE
5.2 attached hereto sets forth a complete and correct list of all outstanding
options setting forth (i) the exercise price of each outstanding Stock Option,
(ii) the number of Stock Options exercisable, and (iii) a general description of
the vesting schedules of the Stock Options. SCHEDULE 5.2 attached hereto sets
forth a complete and correct list of all restricted stock awards including the
recipients and the number of shares received or to be received by each.
5.3 TITLE TO SHARES ACQUIRED IN ISSUER SELF-TENDER. Upon
consummation of the Issuer Self-Tender, the Seller will be the lawful beneficial
owner of all the shares of Common Stock acquired upon consummation of the Issuer
Self-Tender, free and
<PAGE>
-17-
clear of all liens, claims, charges, encumbrances, restrictions, rights and
options to purchase, voting trusts or agreements, calls and commitments of any
kind (collectively, "ENCUMBRANCES").
5.4 REGISTRATION RIGHTS. The Purchaser shall, by virtue of its
purchase of Securities hereunder or conversion of the Preferred Stock for
Conversion Shares or exercise of the Warrant for Warrant Shares, be a holder of
Registrable Securities, as defined in the Registration Rights Agreement, and be
entitled to the rights of such a holder under such Registration Rights
Agreement.
5.5 PROXY STATEMENT AND ISSUER TENDER OFFER DOCUMENTS; SEC
DOCUMENTS. Each of the Proxy Statement and each Issuer Tender Offer Document
will comply in all material respects with the Exchange Act. None of the Proxy
Statement or any Issuer Tender Offer Document will include any untrue statement
of a material fact or will omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Each SEC Document, as of the date of its filing with the
SEC, complied as to form in all material respects with the requirements of the
Act and Exchange Act and did not include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
5.6 AUTHORITY AND QUALIFICATION OF THE SELLER. The Seller has
the corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the SEC Documents, the Proxy Statement
and the Issuer Tender Offer Documents and as currently owned, leased or
conducted. The Seller is duly qualified to transact business as a foreign
corporation and is in good standing in each jurisdiction in which the conduct of
its business or its ownership, leasing or operation of property requires such
qualification, other than any failure to be so qualified or in good standing as
would not, singly or in the aggregate with all such other failures, reasonably
be expected to have a Material Adverse Effect.
5.7 NO SUBSIDIARIES. The Seller has no Subsidiaries.
5.8 NO CONTRAVENTION, CONFLICT, BREACH, ETC. The execution,
delivery and performance of each Transaction Document by the Seller and the
consummation of the transactions
<PAGE>
-18-
herein and therein contemplated to be performed by the Seller, and the
consummation of the Issuer Self-Tender, do not and will not constitute or result
in (1) a breach or violation of, or a default under, the Articles of
Incorporation or by-laws of the Seller, (2) a breach or violation of, a default
under or an event triggering any payment or other obligation pursuant to, any of
the Seller's existing bonus, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock and stock option plans, stock appreciation rights,
all employment or severance contracts, and all similar arrangements of the
Seller (the "COMPENSATION AND BENEFIT PLANS") or any grant or award made under
any of the foregoing, (3) a breach, violation or event triggering a right of
termination of, or a default under, or the acceleration of or the creation of a
lien, pledge, security interest or other encumbrance on assets (with or without
the giving of notice or the lapse of time or both) pursuant to any provision of
any agreement, lease of real or personal property, marketing agreement,
contract, note, mortgage, indenture, arrangement or other obligation
("CONTRACTS") of the Seller or any law, rule, ordinance or regulation or
judgment, decree, order or award to which the Seller is subject or any
governmental or non-governmental authorization, consent, approval, registration,
franchise, license or permit under which the Seller conducts any of its
business, or (4) any other change in the rights or obligations of any party
under any of the Seller's Contracts. Set forth on SCHEDULE 5.8(a) attached
hereto is a true and complete list of all Compensation and Benefit Plans. Set
forth on SCHEDULE 5.8(b) attached hereto is a true and complete list of all
Contracts having a value or imposing remaining obligations on the Seller of at
least $150,000.
5.9 CONSENTS. Except as required by the HSR Act and the Seller
Shareholder Approval, no Consent of or with any (A) court or (B) government
agency or body or (C) other third party (whether acting in an individual,
fiduciary or other capacity) is required for the consummation of the
transactions contemplated by this Agreement and the other Transaction Documents,
the Proxy Statement or the Issuer Tender Offer Documents to be performed by the
Seller, except (1) such as have been obtained and made and are in full force and
effect or such others as will be obtained or made prior to the Closing (all of
which consents, approvals, etc. are described in SCHEDULE 5.9 attached hereto)
and (2) such as may be required under the Act and state securities laws in
connection with the performance by the Seller of its obligations under the
Registration Rights Agreement.
<PAGE>
-19-
5.10 NO EXISTING VIOLATION, DEFAULT, ETC. The Seller is not in
violation of (A) its Articles of Incorporation or by-laws or (B) any applicable
law, ordinance, administrative or governmental rule or regulation (except for
any violations, singly or in the aggregate, which do not have a Material Adverse
Effect and except as set forth on SCHEDULE 5.30 attached hereto) or (C) any
order, decree or judgment of any court of governmental agency or body having
jurisdiction over the Seller. No event of default or event that, but for the
giving of notice or the lapse of time or both, would constitute an event of
default exists or, upon the consummation by the Seller of the transactions
contemplated by any Transaction Document, the Proxy Statement or the Issuer
Tender Offer Documents, will exist, under any Contract or any lease, permit,
license or other agreement or instrument to which the Seller is a party or by
which the Seller is bound or to which any of the properties, assets or
operations of the Seller is subject (except for any events of default or other
defaults which, singly or in the aggregate, do not have a Material Adverse
Effect). The Seller has appropriate policies in effect requiring that each
employee of the Seller be instructed and directed as to the scope of any medical
License that the Seller is permitted to provide services under and, to the best
knowledge of the Seller, there are no material violations of such policies by
any employee of the Seller.
5.11 LICENSES AND PERMITS. The Seller has such certificates,
permits, licenses, franchises, consents, approvals, orders, authorizations and
clearances from appropriate governmental agencies and bodies ("LICENSES") as
are necessary to own, lease or operate its properties and to conduct its
business in the manner described in the SEC Documents, the Proxy Statement and
the Issuer Tender Offer Documents and as presently conducted and all such
Licenses are valid and in full force and effect, other than any failure to have
any such License or any failure of any such License to be valid and in full
force and effect as would not, singly or in the aggregate with all such other
failures, reasonably be expected to have a Material Adverse Effect. The Seller
is in compliance with its obligations under such Licenses and no event has
occurred that allows, or after notice or lapse of time would allow, revocation
or termination of such Licenses, other than any such failure to be in compliance
with such obligations or any such revocation or termination as would not, singly
or in the aggregate with all such other failures, revocations or terminations,
reasonably be expected to have a Material Adverse Effect. The Seller has no
knowledge of any facts or circumstances that could result in an inability of the
Seller to
<PAGE>
-20-
renew any License. Neither the execution and delivery by the Seller of any of
the Transaction Documents nor the consummation of any of the transactions
contemplated herein or therein (including the conversion of the Preferred Stock
and the exercise of the Warrant) will result in any revocation or termination of
any License or any requirement that the Purchaser be licensed in respect of any
of the Seller's Licenses. Set forth on SCHEDULE 5.11 attached hereto is a
true and complete list of all Licenses held by the Seller and the expiration
date of each such License.
5.12 TRADEMARKS. Except as set forth on SCHEDULE 5.12 attached
hereto, the Seller owns or has obtained valid licenses for all trademarks,
trademark registrations and trade names described in the SEC Documents, Proxy
Statement and Issuer Tender Offer Documents as being owned, licensed or used by
the Seller or that are necessary for the conduct of its business as described in
the SEC Documents, Proxy Statement and Issuer Tender Offer Documents
(collectively, "TRADEMARKS"), other than any such Trademark the failure of
which to own or obtain as would not, singly or in the aggregate with all such
other failures, reasonably be expected to have a Material Adverse Effect and the
Seller is not aware, after due inquiry, of any claim to the contrary or any
challenge by any third party to the rights of the Seller with respect to any
such Trademarks or to the validity or scope of any such Trademarks, which claims
or challenges would, singly or in the aggregate with all other claims or
challenges, reasonably be expected to have a Material Adverse Effect; and the
Seller does not have any claim against a third party with respect to the
infringement by such third party of any such Trademarks, which infringements
would, singly or in the aggregate with all such other infringements, reasonably
be expected to have a Material Adverse Effect.
5.13 TITLE TO PROPERTIES. The Seller has good and marketable
title to all properties (real and personal) owned by the Seller which are
necessary for the conduct of the business of the Seller as set forth in the SEC
Documents, the Proxy Statement and the Issuer Tender Offer Documents and as
currently conducted free and clear of any mortgage, pledge, lien, security
interest, claim or encumbrance of any kind that would, except to the extent
described on SCHEDULE 5.13 attached hereto, materially interfere with the
conduct of the business of the Seller, and all properties held under lease by
the Seller are held under valid, subsisting and enforceable leases, other than
any failure of any such lease to be valid, subsisting or enforceable as would
not, singly or in the aggregate
<PAGE>
-21-
with all such other failures, reasonably be expected to have a Material Adverse
Effect.
5.14 ENVIRONMENTAL MATTERS. (a) The properties, assets and
operations of the Seller are in full compliance with all applicable federal,
state, local and foreign laws, rules and regulations, orders, decrees,
judgments, permits and licenses relating to public and worker health and safety
and to the protection and clean-up of the natural environment and activities or
conditions related thereto, including, without limitation, those relating to the
generation, handling, disposal, transportation or release of hazardous
materials, including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 (collectively, "ENVIRONMENTAL
LAWS"), other than any such failure to be in compliance as would not, singly or
in the aggregate with all such other failures, reasonably be expected to have a
Material Adverse Effect; PROVIDED, HOWEVER, that, as to the handling,
disposal, transportation or release of hazardous materials by persons other than
the Seller, the foregoing representation is subject to the knowledge of the
Seller. With respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or operations, there are
no past, present or reasonably anticipated future events, conditions,
circumstances, activities, practices, incidents, actions or plans of the Seller
that may interfere with or prevent compliance or continued compliance in all
material respects with applicable Environmental Laws, other than any such
interference or prevention as would not, singly or in the aggregate with any
such other interference or prevention, reasonably be expected to have a Material
Adverse Effect. To the best knowledge of the Seller, it is not the operator of
any underground storage tanks (as defined below) located upon and/or serve any
of the Seller's premises. "Underground storage tank" for the purposes of this
Agreement shall mean any one or combination of tanks, including appurtenant
pipes, lines, fixtures and other related equipment, used to contain an
accumulation of hazardous materials, the volume of which, including the volume
of the appurtenant pipes, lines, fixtures and other related equipment, is ten
percent (10%) or more below the ground. The term "HAZARDOUS MATERIALS" shall
mean those substances, including any medical wastes, that are regulated by or
form the basis for liability under any applicable Environmental Laws.
(b) The Seller is not, to the best of Seller's knowledge, the
subject of any federal, state, local or foreign
<PAGE>
-22-
investigation, and the Seller has not received any notice or claim (or is aware
of any facts that would form a reasonable basis for any claim), nor entered into
any negotiations or agreements with any third party, relating to any liability
or remedial action or potential liability or remedial action under Environmental
Laws, nor are there any pending, anticipated or, to the best knowledge of the
Seller, threatened actions, suits or proceedings against or affecting the Seller
or its properties, assets or operations, in connection with any such
Environmental Laws.
5.15 TAXES. For purposes of this Section 5.15, "TAX" or
"TAXES" shall mean all federal, state, local and foreign taxes, duties,
levies, charges and assessments of any nature, including social security
payments and deductibles relating to wages, salaries and benefits and payments
to subcontractors (to the extent required under applicable tax law), and also
including all interest, penalties and additions imposed with respect to such
amounts. Except for liabilities and penalties which would not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect
and except as set forth on SCHEDULE 5.15 attached hereto, (i) all tax returns,
statements, reports and forms (including estimated tax returns and reports)
required to be filed with any taxing authority by or on behalf of the Seller
(collectively, the "RETURNS") have been or will be filed when due in
accordance with all applicable laws except where failure so to file would not
subject the Seller to liabilities or penalties; (ii) as of the time of filing,
the Returns correctly reflected (and, as to any Returns not filed as of the date
hereof, will correctly reflect) the facts regarding the income, business,
assets, operations, activities and status of the Seller and any other
information required to be shown therein; (iii) the Seller has timely paid,
withheld or made provision for all taxes shown as due and payable on the Returns
that have been filed; (iv) the Seller has made or will on or before the Closing
Date make provision for all taxes payable by the Seller for any tax period (or
portion thereof) ending on or before the Closing Date for which no Return has
yet been filed; (v) the charges, accruals and reserves for taxes with respect to
the Seller for any tax period (or portion thereof) ending on or before the
Closing Date reflected on the books of the Seller are adequate to cover such
taxes; (vi) all Returns have been filed with respect to taxable years of the
Seller through the taxable years ended September 30, 1994; (vii) the Seller is
not delinquent in the payment of any tax or has requested any extension of time
within which to file or send any Return, which Return has not since been filed
or sent; (viii) the
<PAGE>
-23-
Seller (or any member of any affiliated or combined group of which the Seller is
or has been a member) has not granted any extension or waiver of the limitation
period applicable to any Returns; (ix) there is no claim, audit, action, suit,
proceeding or investigation now pending or threatened against or with respect to
the Seller of which the Seller is aware in respect of any tax or assessment; and
(x) there are no liens for taxes upon the assets of the Seller except liens for
current taxes not yet due. References to the Seller in this Section 5.15 shall
be deemed to include references to any former Subsidiaries of the Seller at the
time such were Subsidiaries of the Seller.
5.16 LITIGATION. Except as set forth on SCHEDULE 5.16 attached
hereto, there are no pending actions, suits, proceedings or investigations by,
against or affecting the Seller or any of its properties, assets or operations,
or with respect to which the Seller is responsible by way of indemnity or
otherwise, that are required under the Exchange Act to be described in the SEC
Documents filed prior to the date of this Agreement which are not so described.
No pending or, to the knowledge of the Seller, threatened actions, suits,
proceedings or investigations by, against or affecting the Seller or any of its
properties, assets or operations, or with respect to which the Seller is
responsible by way of indemnity or otherwise, whether or not disclosed in such
SEC Documents, (x) would, except as set forth on SCHEDULE 5.16 attached
hereto, singly or in the aggregate with all such other actions, suits,
investigations or proceedings, reasonably be expected to have a Material Adverse
Effect, or (y) could adversely affect the ability of the Seller to perform its
obligations under this Agreement or any other Transaction Document or in respect
of the Issuer Self-Tender; and, to the best knowledge of the Seller after due
inquiry, no such actions, suits, proceedings or investigations are threatened or
contemplated and there is no reasonable basis, to the best knowledge of the
Seller after due inquiry, for any such action, suit, proceeding or investigation
whether or not threatened or contemplated. The Seller has previously disclosed
to the Purchaser all claims known to it for medical malpractice, if any, to
which the Seller is subject.
5.17 LABOR MATTERS. No labor disturbance by the employees of the
Seller exists or, to the knowledge of the Seller, is threatened. The Seller is
not a party to any collective bargaining agreements or similar agreements or
arrangements with any labor organization or labor representative. To the best
of the Seller's knowledge, no union organiz-
<PAGE>
-24-
ing activities with respect to any of the Seller's employees are occurring or
threatened.
5.18 CONTRACTS. All of the Seller's material contracts that are
required to be described in the SEC Documents, the Proxy Statement or the Issuer
Tender Offer Documents, or to be filed as exhibits thereto, are in full force
and effect. Neither the Seller nor, to the best knowledge of the Seller, any
other party is in breach of or default under any such contracts except for such
breaches and defaults by parties other than the Seller which, singly or in the
aggregate, have not had and would not have a Material Adverse Effect.
5.19 FINDER'S FEES. No broker, finder or other party is entitled
to receive from the Seller any investment banking fee, financial advisory fee,
dealer manager fee, finder's fee, brokerage fee, proxy or other solicitation
fee, success fee, or any other fee, commission, payment, indemnity or expense
reimbursement or other consideration as a result of the transactions
contemplated by this Agreement, the Proxy Statement or the Issuer Tender Offer
Documents, except that the Seller has agreed to pay Hambrecht & Quist
Incorporated certain fees.
5.20 FINANCIAL STATEMENTS. The audited consolidated financial
statements and related schedules and notes included in the SEC Documents, and to
be included in the Proxy Statement and the Issuer Tender Offer Documents, comply
and, in the case of the Proxy Statement and the Issuer Tender Offer Documents,
will comply in all material respects with the requirements of the Exchange Act
and the Act and the rules and regulations of the SEC thereunder, were prepared
in accordance with generally accepted accounting principles consistently applied
throughout the periods involved and fairly present the consolidated financial
condition, results of operations, cash flows and changes in stockholders' equity
of the Seller at the dates and for the periods presented. The unaudited
quarterly consolidated financial statements and the related notes included in
the SEC Documents, and to be included in the Proxy Statement and the Issuer
Tender Offer Documents, present and will present fairly the consolidated
financial condition, results of operations and cash flows of the Seller at the
dates and for the periods to which they relate, subject to year-end audit
adjustments (consisting only of normal recurring accruals), have been and will
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis and have been and will have been prepared on a
basis substantially consistent with that of the audited financial statements
<PAGE>
-25-
referred to above except as otherwise stated therein. No additional adjustment
to the recorded book value of the Seller's consolidated assets as reflected on
its December 31, 1994 balance sheet is necessary or appropriate.
5.21 NO MATERIAL ADVERSE CHANGE. (a) Except as set forth on
SCHEDULE 5.21 attached hereto, since September 30, 1994 (i) the Seller has
conducted its business in the ordinary course and has not incurred any material
liability or obligation (indirect, direct or contingent) or entered into any
material oral or written agreement or other transaction that is not in the
ordinary course of business (other than the Transaction Documents and the Issuer
Self-Tender) or that could reasonably be expected to result in any Material
Adverse Effect; (ii) the Seller has not sustained any material loss or
interference with its business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance); (iii) there
has been no material change in the indebtedness of the Seller, no change in the
capital stock of the Seller and no dividend or distribution of any kind
declared, paid or made by the Seller on any class of its capital stock; (iv)
there has been no event or condition which has caused a Material Adverse Effect,
nor any development, occurrence or state of facts or circumstances that could,
singly or in the aggregate, reasonably be expected to result in a Material
Adverse Effect; (v) there has been no amendment, modification or supplement to
any material term of any Contract required to be identified on SCHEDULE 5.8(b)
attached hereto or any equity security; and (vi) there has been no material
change by the Seller in accounting principles, practices or methods.
(b) Since September 30, 1994, other than in the ordinary course of
business consistent with past practice and other than the Employment Agreements,
there has not been any increase in the compensation or other benefits payable,
or which could become payable, by the Seller, to its officers or key employees,
or any amendment of any of the Compensation and Benefit Plans.
5.22 INVESTMENT COMPANY. The Seller is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
5.23 CONTINGENT LIABILITIES. Except as fully reflected or
reserved against in the financial statements included in the SEC Documents filed
immediately prior to the date of this Agreement, or disclosed in the footnotes
contained in such financial statements, the Seller had no liabilities
<PAGE>
-26-
(including tax liabilities) at the date of such financial statements, absolute
or contingent, that were material either individually or in the aggregate to the
Seller.
5.24 NO CHANGE OF CONTROL PUTS. Neither the execution and
delivery by the Seller of any of the Transaction Documents (including this
Agreement) nor the consummation of any of the transactions contemplated
thereunder or hereunder including the conversion of the Preferred Stock and/or
the exercise of the Warrant, nor the consummation of the Issuer Self-Tender,
gives rise to any obligation of the Seller to, or any right of any holder of any
security of the Seller to, require the Seller to, purchase, offer to purchase,
redeem or otherwise prepay or repay any such security, or deposit any funds to
effect the same.
5.25 EXEMPTION FROM REGISTRATION; RESTRICTIONS ON OFFER AND SALE
of Same or Similar Securities. Assuming the representations and warranties of
the Purchaser set forth in Section 6.3 are true and correct, the offer and sale
of the Securities made pursuant to this Agreement will be exempt from the
registration requirements of the Act. Neither the Seller nor any person acting
on behalf of the Seller has, in connection with the offering of the Securities,
engaged in (A) any form of general solicitation or general advertising (as those
terms are used within the meaning of Rule 502(c) under the Act), (B) any manner
involving a public offering within the meaning of Section 4(2) of the Act, or
(C) any action which would require the registration of the offering and sale of
the Securities pursuant to this Agreement under the Act or which would violate
applicable state securities or "blue sky" laws. The Seller will not, directly
or indirectly, make any offer or sale of Securities or of securities of the same
or a similar class as the Securities if as a result the offer and sale of
Securities contemplated hereby could fail to be entitled to exemption from the
registration requirements of the Act. As used herein, the terms "OFFER" and
"SALE" have the meanings specified in Section 2(3) of the Act.
5.26 ERISA. Except as listed in SCHEDULE 5.8(a) attached
hereto, neither the Seller nor any of its ERISA Affiliates maintains or
sponsors, nor is it required to make contributions to nor does it otherwise have
any liability with respect to, any pension, profit sharing, thrift or other
retirement plan, employee stock ownership plan, deferred compensation, stock
purchase, performance share, bonus or other incentive plan, severance plan,
health or group insurance plan, welfare plan or other similar plan, agreement,
or policy,
<PAGE>
-27-
whether or not such plan is intended to be qualified under Section 401(a) of the
Code, including, without limitation, any employee benefit plan within the
meaning of Section 3(3) of ERISA (the "Plans"). The Seller and its ERISA
Affiliates are in compliance in all material respects with the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Internal
Revenue Code of 1986, as amended (the "CODE") and all other applicable
statutes and governmental rules and regulations with respect to the Plans. To
the best knowledge of the Seller, after due inquiry, there are no actions, suits
or claims pending or threatened (other than routine claims for benefits) with
respect to any Plan. Neither the Seller nor any of its ERISA Affiliates has
incurred or reasonably expects to incur any material liability under or pursuant
to Title IV of ERISA. Except for the Supplemental Executive Retirement Plan
listed on SCHEDULE 5.8(a) attached hereto, each Pension Plan is intended to
qualify under Section 401(a) of the Code and has received a favorable
determination letter from the Internal Revenue Service as to such qualification
that addresses plan provisions required by the Tax Reform Act of 1986 and have
been amended to comply with subsequent federal income tax legislation (other
than P.L. 103-465), and with respect to each such Pension Plan intended to be so
qualified, Seller is not aware of any event or condition which would cause such
Pension Plan to fail to be so qualified. No prohibited transactions described
in Section 406 of ERISA or Section 4975 of the Code have occurred which could
result in material liability to the Seller. The consummation of the
transactions contemplated by this Agreement will not result in an increase in
the amount of compensation or benefits (except as contemplated in the Employment
Agreements) or accelerate the vesting or timing of payment of any benefits or
compensation (except as contemplated in the Employment Agreements) payable to or
in respect of any employee of the Seller. The transactions contemplated by this
Agreement will not result in any "parachute payments" (within the meaning of
Section 280G(b) of the Code). As used herein the term "PENSION PLAN" means a
"pension plan", as such term is defined in Section 3(1) of ERISA (other than a
Multiemployer Plan) established or maintained by the Seller or any of its ERISA
Affiliates or as to which the Seller or any of its ERISA Affiliates has
contributed or otherwise may have any liability. "MULTIEMPLOYER PLAN" means a
"multiemployer plan", as such term is defined in Section 4001(a)(3) of ERISA to
which the Seller or any of its ERISA Affiliates is or has been obligated to
contribute or otherwise may have any liability. "ERISA AFFILIATE" means any
trade or business (whether or not incorporated) which is under common control
or would be considered a single employer with the Seller within the meaning of
Section 414(b),
<PAGE>
-28-
(c), (m) or (o) of the Code and the regulations promulgated under those
sections.
5.27 SECURITIES. (a) The Shares, when issued and delivered to
and paid for by the Purchaser pursuant to this Agreement, will be validly
issued, fully paid and nonassessable, and will be free of preemptive or similar
rights and Encumbrances (except as provided in Section 7.1 hereof).
(b) The Warrant, when executed, issued and delivered to and paid
for by the Purchaser pursuant to this Agreement, will be validly issued, fully
paid and nonassessable, and will be free of preemptive or similar rights and any
Encumbrances (except as provided in Section 7.1 hereof), and will be a legal,
valid and binding obligation of the Seller enforceable against the Seller in
accordance with its terms.
(c) The Preferred Stock, when issued and delivered to and paid for
by the Purchaser pursuant to this Agreement, will be validly issued, fully paid
and nonassessable, and will be free of preemptive or similar rights and
Encumbrances (except as provided in Section 7.1 hereof).
(d) The Conversion Shares and the Warrant Shares (in sufficient
amounts to satisfy the initial conversion and exercise requirements of the
Preferred Stock and the Warrant) have been duly reserved for issuance upon
conversion of the Preferred Stock and exercise of the Warrant, as the case may
be, and have been duly authorized by the Seller and, when issued upon such
exercise or conversion in accordance with the terms of the Preferred Stock or
the Warrant, as the case may be, will be validly issued, fully paid and
nonassessable, and such shares will be free of preemptive or similar rights and
Encumbrances (except as provided in Section 7.1 hereof).
5.28 NO MATERIAL MISSTATEMENT. No exhibit, schedule or
certificate furnished or to be furnished by or on behalf of the Seller to the
Purchaser in connection with any Transaction Document contains or will contain
any material misstatement of fact or omits or will omit to state any material
fact necessary to make the statements, in light of the circumstances under which
they are made by the Seller, not misleading. Any assumptions, projections,
forecasts or other estimates of future results provided to the Purchaser by the
Seller were prepared by the Seller in good faith on a basis believed by it to
be reasonable and in a manner consistent with similar projections, forecasts or
other estimates previously prepared by the Seller.
<PAGE>
-29-
5.29 INSURANCE COVERAGE. The Seller has insurance policies and
fidelity bonds covering its assets, business, equipment, properties, operations,
employees, officers and directors of the type and in amounts customarily carried
by persons conducting business similar to that of the Seller. All premiums due
and payable under all such policies and bonds have been paid, and the Seller is
otherwise in full compliance with the terms and conditions of all such policies
and bonds, except where the failure to have made payment or to be in full
compliance would not reasonably be expected to result in a Material Adverse
Effect. The reserves established by the Seller in respect of all matters as to
which the Seller self-insures, including for workers' compensation and workers'
medical coverage, are adequate and appropriate, except as set forth on Schedule
5.29. Set forth on SCHEDULE 5.29 attached hereto is a true and complete list
of all insurance policies, fidelity bonds and self-insurance provisions of the
Seller.
5.30 THIRD-PARTY PAYMENT. (a) The Seller is a certified
participating provider in and under all federal Medicare and Medicaid programs
and, to the extent required, all other third-party payment programs from which
it receives revenues (collectively, "PROGRAMS"). No action, investigation or
proceeding is pending, or to the best of the Seller's knowledge, after due
inquiry, threatened to suspend, limit, terminate, condition, or revoke the
status of the Seller as a provider in any such Program, and the Seller has not
been provided notice by any third-party payor or any administrator on behalf
thereof of its intention to suspend, limit, terminate, revoke, condition or fail
to renew in whole or in part or which action, investigation, proceeding,
suspension, limitation, termination, revocation, condition, or failure of
renewal, would, singly or in the aggregate, have a Material Adverse Effect,
except as expressly set forth in Schedule 5.30 attached hereto.
(b) The Seller has filed on a timely basis all claims, cost
reports or annual filings required to be filed pursuant to any federal or state
governmental or regulatory authority (including pursuant to the Social Security
Act) to secure payments for services rendered by it under any Program, except
where the failure to file such claim, report or other filing would not, singly
or in the aggregate, have a Material Adverse Effect. The Seller has provided
the Purchaser access to all such cost reports. Except as expressly set forth on
Schedule 5.30 attached hereto, the Seller has paid, or caused to be paid, all
refunds, discounts, adjustments, or amounts owing that have become due pursuant
to such claims, reports or
<PAGE>
-30-
filings, and the Seller does not have any knowledge or notice of any material
changes required to be made to any cost reports, claims or filings made by them
for any period or of any deficiency in any such claim, report, or filing, except
for changes and deficiencies that, singly or in the aggregate, would not have a
Material Adverse Effect.
(c) The Seller has not received any notice of pending or
threatened investigations by any Program which poses a risk to the Seller's
participation in any Program or, except as disclosed on SCHEDULE 5.30 attached
hereto, may result in any adjustments to reimbursements that have been paid.
All billing practices by the Seller to all third-party payors, including under
all state and federal Programs and with private insurance companies, have been
in material compliance with all applicable laws, regulations and, to the best
knowledge of the Seller, policies of all such third-party payors, except for
disputed or contested matters identified on SCHEDULE 5.30 attached hereto.
Neither the Seller, nor any Affiliate thereof, nor any director, officer or
employee thereof, is a party to any contract, lease, agreement or arrangement,
including any joint venture or consulting agreement with any physician,
hospital, nursing facility, home health agency or other person who is in a
position to make or influence referrals to or otherwise generate business for
the Seller to provide services, lease space, lease equipment or engage in any
other venture or activity which is prohibited by law or regulations, except as
set forth on SCHEDULE 5.30 attached hereto. Set forth on SCHEDULE 5.30
attached hereto is an accurate and complete description of all disputes or
contested matters relating to the Seller's participation in any Medicare or
Medicaid Program.
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser hereby represents and warrants to the Seller that:
6.1 ORGANIZATION, GOOD STANDING, POWER, AUTHORITY, ETC. The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Purchaser has the full power and
authority to execute and deliver this Agreement and each other Transaction
Document (to the extent it is a party thereto), and to perform its obligations
under this Agreement and each other Transaction Document (to the extent it is a
party thereto). The Purchaser has taken all action required by law, the
Purchaser's certificate of incorporation (if applicable), its by-laws (if
applicable) or otherwise required to be taken by it to authorize the
<PAGE>
-31-
execution and delivery of each Transaction Document (to the extent it is a party
thereto) and the consummation of the transactions contemplated hereby and
thereby to be performed by it as of or on the Closing Date. This Agreement has
been duly executed and is, and upon execution and delivery thereof at the
Closing each of the other Transaction Documents (to the extent it is a party
thereto) will be, a valid and binding obligation of the Purchaser.
6.2 NO CONFLICTS; NO CONSENTS. Neither the execution and
delivery of this Agreement or any other Transaction Document by the Purchaser
nor the consummation by the Purchaser of the Investment contemplated hereby or
thereby will (a) conflict with, or result in a breach of, any provision of its
certificate of incorporation or by-laws or (b) assuming that the waiting period
under the HSR Act has expired or been terminated, violate any statute or law or
any judgment, order, writ, injunction, decree, rule or regulation applicable to
the Purchaser and/or any of its subsidiaries. Except as contemplated by this
Agreement, no Consent of any governmental or regulatory authority is required in
connection with the execution and delivery of, and the performance by the
Purchaser of its obligations under, this Agreement or any other Transaction
Document to which it is a party (except such as have been obtained or made).
6.3 PURCHASE FOR INVESTMENT. The Purchaser is purchasing the
Securities for investment in an unregistered private placement for its own
account and not with a view to, or for sale in connection with, any distribution
thereof which would be in violation of the Act; PROVIDED HOWEVER, that the
disposition of the Securities, the Conversion Shares and the Warrant Shares
shall at all times be within the sole discretion of the Purchaser.
6.4 FINANCIAL STATEMENTS. The audited consolidated financial
statements and related schedules and notes included or incorporated by reference
in the annual report on Form 10-K for the most recent fiscal year of Manor Care,
Inc., of which the Purchaser is a wholly owned subsidiary ("Manor Care"), filed
by Manor Care with the SEC comply in all material respects with the requirements
of the Exchange Act, were prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved and
fairly present the consolidated financial condition, results of operations, cash
flows and changes in stockholders' equity of Manor Care at the dates and for the
periods presented. The unaudited quarterly consolidated financial statements
and the
<PAGE>
-32-
related notes included in the quarterly report on Form 10-Q filed by Manor Care
with the SEC for the most recent fiscal quarter of Manor Care ended after the
end of its most recent fiscal year present fairly the consolidated financial
condition, results of operations and cash flows of Manor Care at the dates and
for the periods to which they relate, subject to year-end audit adjustments
(consisting only of normal recurring accruals), have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis and
have been prepared on a basis substantially consistent with that of the audited
financial statements referred to above except as otherwise stated therein. The
Purchaser is not in material violation of any material law or material
governmental rule or regulation known to the Purchaser to be applicable to it.
6.5 FINDER'S FEES. No broker, finder or other party is entitled
to receive from the Purchaser any investment banking fee, financial advisory
fee, dealer manager fee, finder's fee, brokerage fee, proxy or other
solicitation fee, success fee, or any other fee, commission, payment, indemnity
or expense reimbursement or other consideration as a result of the transactions
contemplated by this Agreement, the Proxy Statement or the Issuer Tender Offer
Documents.
6.6 PROVISION OF INFORMATION. The information to be provided by
the Purchaser to the Seller in the information statement to be delivered
pursuant to Section 302A.671 (Subdivision 2) of the Minnesota BCA, and any
information expressly so required by the Exchange Act to be furnished by the
Purchaser for inclusion in the Proxy Statement or the Issuer Tender Offer
Documents, will contain the information so required with respect thereto, and
the factual information provided therein will not contain any untrue statement
of material fact or omit to state any material fact necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading. The Purchaser will promptly notify the Seller in writing
of any material change in any of the information so provided.
7. COVENANTS OF THE PARTIES.
7.1 RESTRICTION ON TRANSFER. The Purchaser represents and
warrants to and agrees with the Seller that the Purchaser will not dispose of
any of the Securities, Warrant Shares or Conversion Shares, except pursuant to
(i) an effective registration statement under the Act or (ii) an applicable
exemption from registration under the Act. In connection with
<PAGE>
-33-
any disposition by the Purchaser pursuant to clause (ii) of the preceding
sentence, the Purchaser shall furnish to the Seller an opinion of counsel
reasonably satisfactory to the Seller to the effect that such exemption from
registration is available in connection with such sale.
7.2 CERTIFICATES FOR SECURITIES, CONVERSION SHARES AND WARRANT
SHARES TO BEAR LEGENDS. (a) So long as the Securities are Registrable
Securities (treating the Warrants and the Preferred Stock as Registrable
Securities for purposes of this Section 7.2) the Securities shall be subject to
a stop-transfer order and the certificate or certificates therefor shall bear
the following legend by which each holder thereof shall be bound:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE [AND THE SHARES OF
COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON CONVERSION OR EXERCISE
HEREOF] MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR (ii) AN
APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER. ANY SALE PURSUANT TO
CLAUSE (ii) OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO IN HOME HEALTH, INC. TO THE EFFECT THAT
SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH
SALE.
(B) So long as the Conversion Shares or the Warrant Shares are
Registrable Securities the Conversion Shares or the Warrant Shares or other
securities issued upon conversion of the Securities shall, unless previously
issued pursuant to an effective registration statement under the Act, be subject
to a stop-transfer order and the certificate or certificates evidencing any
such Conversion Shares or Warrant Shares or other securities shall bear the
following legend by which each holder thereof shall be bound:
"THE SHARES OR OTHER SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, OR (ii) AN APPLICABLE
EXEMPTION FROM REGISTRATION THEREUNDER. ANY SALE PURSUANT TO CLAUSE (ii)
OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IN HOME HEALTH, INC. TO THE EFFECT THAT SUCH
EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE.
<PAGE>
-34-
7.3 REMOVAL OF LEGENDS. After termination of the requirement
that all or part of such legend be placed upon a certificate representing any of
the Securities, the Conversion Shares or the Warrant Shares, the Seller shall,
upon receipt of evidence reasonably satisfactory to it that such requirement has
terminated and upon the written request of the holders of any of the Securities,
Conversion Shares or Warrant Shares, to issue certificates for the Securities,
Conversion Shares or Warrant Shares, as the case may be, issue Securities,
Conversion Shares or Warrant Shares, as the case may be, that do not bear such
legend.
7.4 PRE-CLOSING ACTIVITIES. From and after the date of this
Agreement until the Closing, the Seller and the Purchaser shall act with good
faith towards, and shall use their best efforts to consummate, the purchase and
sale contemplated by this Agreement, and neither the Seller nor the Purchaser
will take any action that would prohibit or impair its ability to consummate the
purchase and sale contemplated by this Agreement; PROVIDED, HOWEVER, that
nothing in this Section 7.4 shall be deemed to be in derogation of Section 8.
The Seller will use its best efforts to obtain or make each of the consents,
approvals, authorizations, filings, registrations, etc. as are set forth on
SCHEDULE 5.9 attached hereto and which shall not have been obtained or made
prior to the execution of this Agreement. The Seller will not amend, modify,
extend, withdraw or terminate the Issuer Self-Tender without the prior approval
of the Purchaser; provided, that, upon a termination of this Agreement pursuant
to Section 8, the Seller may take any action contemplated by this sentence.
7.5 INFORMATION. So long as any Security, Conversion Share or
Warrant Share is outstanding, the Seller shall file with the SEC the annual
reports, quarterly reports and the information, documents and other reports that
are required to be filed with the SEC pursuant to Sections 13 and 15 of the
Exchange Act, whether or not the Seller has or is required to have a class of
securities registered under the Exchange Act and whether or not the Seller is
then subject to the reporting requirements of the Exchange Act, at the time the
Seller is or would be required to file the same with the SEC and, within 30 days
after the Seller is or would be required to file such reports, information or
documents with the SEC, to mail copies of such reports, information and
documents to the holders of the Securities, Conversion Shares or Warrant Shares.
7.6 FURTHER ASSURANCES. Subject to Section 8 hereof, each party
shall execute and deliver such additional
<PAGE>
-35-
instruments and other documents and shall take such further actions as may be
necessary or appropriate to effectuate, carry out and comply with all of the
terms of this Agreement and the transactions contemplated hereby, including,
without limitation, making application as soon as practicable hereafter for all
consents and approvals required in connection with the transactions contemplated
hereby and diligently pursuing the receipt of such consents and approvals in
good faith thereafter.
7.7 SHAREHOLDERS' MEETING; PROXY STATEMENT AND ISSUER TENDER OFFER
DOCUMENTS. (a) The Seller shall, as promptly as practicable, call and convene
a meeting of the holders of its voting stock and shall recommend, and shall use
its best efforts (including the preparation and circulation of the Proxy
Statement) to obtain, the approval of such holders of the transactions
contemplated by this Agreement.
(b) Neither the Proxy Statement nor any Issuer Tender Offer
Document shall be filed with the SEC, and no amendment or supplement to the
Proxy Statement or any Issuer Tender Offer Document shall be filed with the SEC,
without prior consultation with the Purchaser and its counsel or if the
Purchaser shall not be reasonably satisfied with the contents of any such
document, amendment or supplement. If any event shall occur, condition exist or
information become known the effect of which would be to cause the Proxy
Statement or any Issuer Tender Offer Document to contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
in order to make the statement contained therein not misleading, the Seller
shall, subject to prior consultation with the Purchaser and its counsel,
promptly amend or supplement the Proxy Statement or Issuer Tender Offer Document
to correct such misstatement or omission. The Seller shall notify the Purchaser
promptly of the receipt by it of any comments from the SEC or its staff and of
any request by the SEC for amendments or supplements to the Proxy Statement or
any Issuer Tender Offer Document and shall supply the Purchaser with copies of
all correspondence between it and its representatives, on the one hand, and the
SEC or the members of its staff, on the other hand, with respect to the Proxy
Statement or any Issuer Tender Offer Document.
7.8 HART-SCOTT-RODINO. To the extent applicable, the Seller and
the Purchaser shall make all filings and furnish all information required by the
HSR Act with respect to the transactions contemplated by the Transaction
Documents, the Proxy Statement and the Issuer Tender Offer Documents and shall
<PAGE>
-36-
use their best efforts to obtain the early termination of the waiting period
thereunder; PROVIDED, HOWEVER, that neither the Seller nor the Purchaser
shall be required to agree to dispose of or hold separate any portion of its
business or assets.
7.9 ACQUISITION PROPOSALS. The Seller agrees that, prior to the
Closing, neither the Seller nor any of its officers, directors or employees nor
any agents, consultants, financial advisors, attorneys or accountants for any of
them shall initiate, solicit or encourage, directly or indirectly, any inquiries
or the making of any proposal or offer (including, without limitation, any
proposal or offer to stockholders of the Seller) with respect to, or that may
reasonably be expected to lead to (i) a tender offer or exchange offer for any
securities of the Seller, (ii) a merger, consolidation, business combination,
share exchange or similar transaction involving the Seller, (iii) any purchase,
lease, exchange, pledge, mortgage, transfer or other disposition of at least 20%
of the assets of, or any equity securities of, the Seller (except for pledges of
assets to commercial lenders in connection with a commercial lending
arrangement), (iv) any public announcement of a proposal, plan or intention to
do any of the foregoing or (v) any agreement or arrangement to engage in any of
the foregoing with any person or persons other than the Purchaser (any of the
foregoing being hereinafter referred to as an "ACQUISITION PROPOSAL") or
engage in any negotiations concerning, or provide any information or data to or
have any discussions with any person relating to, an Acquisition Proposal, or
otherwise facilitate directly or indirectly any effort or attempt to make or
implement an Acquisition Proposal. The Seller will immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing. The Seller
will take the necessary steps to inform the individuals or entities referred to
in the first sentence hereof of the obligations undertaken in this Section 7.9.
The Seller will notify the Purchaser immediately if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with the
Seller. Nothing contained in this Agreement shall prohibit the Seller and its
directors from (i) making to the stockholders any recommendation and related
filing with the SEC, as required by Rules 14e-2 and 14d-9 under the Exchange
Act, with respect to any tender offer, (ii) informing the shareholders of the
Seller in the Proxy Statement of information that is material to the vote with
respect to the transactions contemplated thereby, or (iii)(x) changing or
withdrawing the recommendation of the
<PAGE>
-37-
directors with respect to this Agreement and such transactions or (y) engaging
in negotiations concerning, or providing information or data to or having
discussions with any person relating to, an unsolicited BONA FIDE Acquisition
Proposal in writing made by such person; PROVIDED, HOWEVER, that, prior to
any action referred to in this subclause (y), the Seller shall notify the
Purchaser of any such Acquisition Proposal and as to the terms thereof, if, in
any such case under this clause (iii), the directors conclude that any action
described in clause (iii) is required by their fiduciary duties (as determined
in good faith by the Board of Directors of the Seller upon the advice of
independent legal counsel and based upon, if so requested by the Board of
Directors, financial analyses provided by a financial advisor to the Board of
Directors).
7.10 ACCESS. The Seller shall afford the Purchaser's officers,
employees, counsel, accountants, agents, financial advisors, consultants and
other authorized representatives ("REPRESENTATIVES") reasonable access during
normal business hours before the Closing to its properties, books, contracts,
records and personnel and advisors (who will be instructed by the Seller to
cooperate) and the Seller shall furnish promptly to the Purchaser all
information concerning its business, properties and personnel as the Purchaser
or its Representatives may reasonably request; PROVIDED, HOWEVER, that any
review will be conducted in a way that will not interfere unreasonably with the
conduct of the Seller's business; PROVIDED, FURTHER, HOWEVER, that no
review pursuant to this Section 7.10 shall affect or be deemed to modify any
representation or warranty made by the Seller or any right or remedy of the
Purchaser arising from any breach thereof. The Purchaser will keep all
information and documents obtained pursuant to this Section 7.10 which
represents material non-public information on a confidential basis in accordance
with the terms and provisions of the Confidentiality Agreement dated as of
January 3, 1995 between the parties to this Agreement.
7.11 PUBLICITY. The Seller and the Purchaser will consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement, the Proxy Statement, the Issuer
Self-Tender or the transactions contemplated hereby and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by law or by obligations pursuant to any listing
agreement with any securities exchange.
<PAGE>
-38-
7.12 RESERVATION OF SHARES; COMPLIANCE WITH LAW UPON ISSUANCE OF
CONVERSION SHARES OR WARRANT SHARES; LISTING. (a) The Seller shall at all
times reserve and keep available, out of its authorized and unissued stock,
solely for the purpose of effecting the exercise of the Warrant or conversion of
the Preferred Stock, such number of shares of its Common Stock free of
preemptive rights as shall from time to time be sufficient to effect the
exercise of the entire Warrant or conversion of all of the shares of Preferred
Stock from time to time.
(b) So long as any of the Preferred Stock or the Warrant are
outstanding, the Seller shall use its best efforts to obtain any approvals or
consents of any governmental agency or authority under state or federal law that
may be required so that the Conversion Shares and the Warrant Shares may be
lawfully issued or transferred and delivered and entitled to the benefits of
each other share of Common Stock then issued and outstanding, and to list or
obtain admission for trading, with effect from such date of issuance or
delivery, on such securities exchange or market on which the Common Stock is
then listed or admitted for trading, the Conversion Shares and the Warrants
Shares issued upon conversion or exercise of the Preferred Stock or the Warrant.
7.13 CONDUCT OF BUSINESS BY THE SELLER PENDING THE CLOSING.
Except as otherwise expressly contemplated hereby or as disclosed on SCHEDULE
7.13 attached hereto, the Seller covenants and agrees as follows that, as and
after the date of this Agreement and up to the Closing, unless the Purchaser
shall otherwise expressly agree in writing:
(a) The Seller shall use its best efforts to maintain and preserve
its business organization, assets, employees and advantageous business
relationships and conduct its business in the ordinary course pursuant to
ordinary business terms and consistent with past practice;
(b) The Seller shall not directly or indirectly do any of the
following: (i) sell, pledge, dispose of, lease or encumber any assets of
the Seller (including, without limitation, in respect of any indebtedness
or accounts receivable owed to it or any claims held by it); (ii) amend
its Articles of Incorporation or by-laws; (iii) split, combine or
reclassify any shares of its capital stock or declare, set aside or pay
any dividend or distribution, payable in cash, stock, property or
otherwise with respect to any of its capital stock;
<PAGE>
-39-
(iv) redeem, purchase or otherwise acquire or offer to redeem, purchase or
otherwise acquire any of its capital stock (other than pursuant to the
Issuer Self-Tender); (v) adopt a plan of complete or partial liquidation
or resolutions providing for the complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Seller; (vi) create, form or acquire any
Subsidiary or transfer any assets or liabilities to any new Subsidiary of
the Seller; or (vii) authorize or propose any of the foregoing, or enter
into any contract, agreement, commitment or arrangement to do any of the
foregoing;
(c) The Seller shall not, directly or indirectly, (i) except for
shares of Common Stock issuable upon exercise of options outstanding on
the date of this Agreement, issue, sell, pledge, dispose of or encumber,
or authorize, propose or agree to the issuance, sale, pledge or
disposition of, any shares of, or any options, warrants or rights of any
kind to acquire any shares of or any securities convertible into or
exchangeable or exercisable for any shares of, its capital stock of any
class or any other securities in respect of, in lieu of, or in
substitution for shares of Common Stock outstanding on the date of this
Agreement; (ii) acquire (by merger, consolidation or acquisition of stock
or assets) any corporation, partnership or other business organization or
division thereof or make any investment either by purchase of stock or
securities, contributions to capital, property transfer or purchase of any
property or assets of any other individual or entity; (iii) incur any
indebtedness for borrowed money or issue any debt securities or enter into
any hedging, option, derivative or similar transaction or assume,
guarantee, endorse or otherwise as an accommodation become responsible
for, the obligations of any other individual or entity, or make any loans
or advances provide credit support to any entity; (iv) authorize,
recommend or propose any change in its capitalization; (v) change any
assumption underlying, or method of calculating, any bad debt,
contingency, provision or other reserve; (vi) pay, discharge or satisfy
any claims, liabilities or obligations (absolute, accrued, contingent or
otherwise), other than the payment, discharge or satisfaction of
liabilities (including accounts payable) in the ordinary course of
business pursuant to ordinary business terms and consistent with past
practice, or collect, or accelerate the collection of, any amounts owed
(including accounts receivable) other than the collection in the ordinary
course
<PAGE>
-40-
of business; (vii) waive, release, grant or transfer any rights of value
or modify or change in any material respect any existing license, lease,
contract or other document; or (viii) authorize or propose any of the
foregoing, or enter into or modify any contract, agreement, commitment or
arrangement to do any of the foregoing;
(d) The Seller shall not adopt or amend (except as may be required
by law) any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other employee benefit
plan, agreement, trust, fund or other arrangement for the benefit or
welfare of any employee or former employee or pay any benefit not required
by any existing plan, arrangement or agreement, except that, with respect
to employees who are not officers, in the ordinary course of business and
consistent with past practice, the Seller may increase the compensation or
fringe benefits of any such employee; PROVIDED, HOWEVER, that the
aggregate increase for any such employee shall not exceed any approved pay
scales for fiscal year 1995 for employees of equal rank and responsibility
and the Seller shall not amend such pay scales or promote any employee to
circumvent any compensation limitations contained in such pay scales;
(e) The Seller shall not take any action with respect to the grant
of any severance or termination pay or with respect to any increase of
benefits payable under its severance or termination pay policies in effect
on the date hereof other than the provision of severance or termination
benefits in the ordinary course of business consistent with past practice
to non-officer employees of the Seller;
(f) The Seller shall not make any tax election or settle or
compromise any federal, state, local or foreign income or other tax
liability; and
(g) The Seller shall not agree, in writing or otherwise, to take
any of the foregoing actions or any action which would make any
representation or warranty in Section 5 hereof untrue or incorrect in any
respect.
7.14 NOTICE OF CERTAIN EVENTS. The Seller shall promptly notify
the Purchaser, confirmed in writing, of any of the following on or prior to the
Closing:
<PAGE>
-41-
(a) Any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with
the transactions contemplated by any Transaction Document, the Proxy
Statement or the Issuer Tender Offer Documents;
(b) Any notice of other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by any Transaction Document, the Proxy Statement or the
Issuer Tender Offer Documents;
(c) Any actions, suits, claims, investigations or proceedings
commenced or, to its best knowledge threatened against, relating to or
involving or otherwise affecting the Seller that, if pending on the date
of this Agreement, would have been required to have been disclosed
pursuant to Sections 5.15 and 5.16 or that relate to the consummation of
the transactions contemplated by any Transaction Document, the Proxy
Statement or the Issuer Tender Offer Documents;
(d) The Board of Directors of the Seller determining to withdraw
or modify a recommendation to approve this Agreement and the transactions
contemplated by any Transaction Document, the Proxy Statement or the
Issuer Tender Offer Documents, or the Committee determining to withdraw or
modify in any respect its approval of this Agreement, the Investment and
the transactions contemplated hereby and thereby;
(e) Any notice of, or other communication relating to, a default
or event that, with notice or lapse of time or both, would become a
default, received by the Seller subsequent to the date of this Agreement
and prior to the Closing Date, under any Contract, or any circumstances of
which the Seller is aware that are reasonably likely to result in such a
default or event or any Material Adverse Effect;
(f) Any material adverse change in the condition (financial or
otherwise), properties, business, results of operations, prospects or
solvency of the Seller or to the interest of stockholders in the Seller,
or the occurrence of any event which, so far as reasonably can be foreseen
at the time of its occurrence, is reasonably likely to result in any such
change; and
<PAGE>
-42-
(g) Any breach by the Seller of any of its representations,
warranties, covenants or agreements contained in any Transaction Document
or any circumstance that has resulted in or is reasonably likely to result
in any such representation or warranty being untrue, or any such covenant
or agreement not being performed or complied with, or any condition not
being fulfilled as of the Closing Date.
7.15 LOCATION OF CORPORATE HEADQUARTERS. Subsequent to the
Closing, the Purchaser shall cause the corporate headquarters of the Seller to
be maintained in the Minneapolis, Minnesota metropolitan area for a period of
two years after the Closing Date; provided, that, the Purchaser shall not be
bound by this Section 7.15 if the Board of Directors of the Seller acting
unanimously determines that the Purchaser need not be so bound.
7.16 CONTINUING REPORTING COMPANY. For a period of two years
after the Closing Date, the Purchaser shall cause the Seller (i) to continue to
file the periodic reports required to be filed under Section 13 of the Exchange
Act, (ii) to maintain its corporate existence, (iii) not to seek to cause the
Common Stock to cease to be traded on the Nasdaq National Market (other than in
conjunction with the listing of the Common Stock on a national securities
exchange) and (iv) not to effect a "Rule 13e-3 transaction" within the meaning
of Rule 13e-3 promulgated under the Exchange Act.
7.17 SCOPE OF BUSINESS. For a period of two years after the
Closing Date, the Purchaser shall not, and the Purchaser shall cause its
Affiliates not to, limit the Seller's ability to continue to operate in the
lines of business, and provide the services and products to third parties (which
may include Affiliates of the Purchaser), that it engages in and provides as of
the Closing Date.
7.18 EMPLOYMENT AGREEMENTS. On or prior to the Closing Date, the
Seller shall offer to each named individual in each of the Employment Agreements
attached as Exhibits H, L and M hereto the opportunity to enter into his or her
respective Employment Agreement on the Closing Date and shall execute on the
Closing Date each Employment Agreement that the named individual therein elects
to accept. The Purchaser agrees that as long as Judy M. Figge and Kenneth J.
Figge are employed by the Company, the Purchaser will vote, or cause to be
voted, all shares of Common Stock beneficially owned by the Purchaser and its
Affiliates in favor of their election to the Board of Directors.
<PAGE>
-43-
7.19 FUTURE ARRANGEMENTS. Subsequent to the Closing, the parties
hereto may determine to discuss entering into, or enter into, agreements or
arrangements which they deem prudent and mutually beneficial for the provision
of services between the parties on terms that are fair to each party. Such
services may include, without limitation, administrative services, financial or
treasury management services, reimbursement matter services, legal services,
accounting services and other similar types of services.
7.20 CHIEF EXECUTIVE OFFICER. Immediately upon consummation of
the Closing, Mark Gildea will be employed as the Chief Executive Officer of the
Seller and will devote at least approximately 75% of his entire working time to
the affairs of the Seller and the balance of his working time will be spent on
the affairs of the Purchaser and its Affiliates (other than the Seller). The
Purchaser will reimburse the Seller for 25% (or such lesser percentage to the
extent that Mr. Gildea devotes more than 75% of his time to the Seller) of the
costs associated with the employment of Mr. Gildea by the Seller.
8. TERMINATION. (a) This Agreement shall terminate upon
either party giving notice of the termination of this Agreement as a result of
the occurrence of any of the following:
(i) by mutual written agreement of the Seller and the Purchaser;
(ii) if the Closing shall not have been consummated on or before
September 15, 1995;
(iii) prior to Closing if after the date hereof there shall be any
law or regulation enacted or promulgated that makes consummation of the
transactions contemplated hereby illegal or otherwise prohibited or if
consummation of the transactions contemplated hereby would violate any
non-appealable final order, decree or judgment of any court or
governmental body having competent jurisdiction; or
(iv) the Seller's shareholders fail to provide the requisite vote
to approve this Agreement and the transactions contemplated by this
Agreement at the meeting duly held for such purpose pursuant to Section
7.7.
(b) This Agreement may be terminated by the Purchaser upon the
occurrence of any of the following:
<PAGE>
-44-
(i) (x) the Seller shall have breached Section 7.9 or 7.13, (y)
the Seller shall have breached any of its representations or warranties or
other covenants or agreements contained in this Agreement, which breach
pursuant to this subclause (y) is not cured within ten days after notice
from the Purchaser to the Seller specifying such breach or (z) the
letters, resolutions or legal opinion referred to in Section 3 hereof
shall have been withdrawn or modified;
(ii) the Board of Directors of the Seller shall have withdrawn or
modified its approval or recommendation of this Agreement and the
transactions contemplated hereby or by the other Transaction Documents,
the Proxy Statement or the Issuer Tender Offer Documents, or the Board of
Directors of the Seller, upon request by the Purchaser, shall fail
promptly to reaffirm such approval or recommendation, or shall have
resolved to do any of the foregoing;
(iii) the Committee shall have withdrawn or modified its approval of
this Agreement or the Investment, or the Committee, upon request by the
Purchaser, shall fail promptly to reaffirm such approval, or shall have
resolved to do any of the foregoing; or
(iv) (x) the Board of Directors of the Seller shall have
recommended to the shareholders of the Seller an Acquisition Proposal or
shall have resolved to do so, (y) a tender offer or exchange offer for all
or a portion of the Seller's Common Stock shall be commenced and Seller's
Board of Directors shall not have recommended that stockholders not tender
shares of Common Stock into such tender or exchange offer, or (z) any
person (other than the Purchaser) or group (within the meaning of Section
13(d) of the Exchange Act) shall have acquired, or obtained the right to
acquire, beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of 20% or more of the outstanding shares of the Common
Stock.
(c) This Agreement may be terminated by the Seller upon the
occurrence of any of the following:
(i) The Purchaser shall have breached any of its representations,
warranties, covenants or agreements contained in this Agreement, which
breach is not cured within ten days after notice from the Seller to the
Purchaser specifying such breach; or
<PAGE>
-45-
(ii) If the Board of Directors of the Seller (x) fails to make or
withdraws its recommendation that shareholders of the Seller approve this
Agreement and the transactions contemplated hereby if there is at such
time an Acquisition Proposal or (y) recommends that shareholders of the
Seller accept or approve an Acquisition Proposal, in each case only if the
Board of Directors concludes that such action is required by their
fiduciary duties (as determined in good faith by the Board of Directors of
the Seller upon the advice of independent legal counsel and based upon, if
so requested by the Board of Directors, financial analyses of a financial
advisor to the Board of Directors).
(d) If this Agreement is terminated pursuant to this Section 8,
this Agreement shall forthwith become void and be of no further force or effect
and all obligations of the Seller and Purchaser under this Agreement shall
terminate, except that (i) the provisions of Sections 10, 11, 12.2, 12.4 and
12.7 hereof shall survive such termination and shall remain in full force and
effect and (ii) such termination shall not constitute a waiver by or bar against
the exercise by any party to this Agreement of any rights or remedies at law or
in equity that such party may have by reason of a breach of any breach of
representation, warranty or covenant of this Agreement by the other party.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Agreement and in each other
Transaction Document shall survive the execution and delivery of this Agreement,
the termination of this Agreement, the delivery of the Securities and any
examination or investigation made by any party to this Agreement or any of their
successors and assigns; PROVIDED, HOWEVER, that, the representations and
warranties contained in this Agreement shall not survive, and shall be of no
further force and effect, after December 31, 1996.
10. SUCCESSORS AND ASSIGNS. All covenants and agreements
contained in this Agreement by or on behalf of the parties hereto shall bind,
and inure the benefit of, the respective successors and assigns of the parties
hereto; PROVIDED, HOWEVER, that (a) the Seller may not assign any of its
rights or obligations under this Agreement and (b) the rights of the Purchaser
hereunder may not be assigned (except to Affiliates of the Purchaser) without
the prior written consent of the Seller (which consent shall not be unreasonably
withheld or delayed).
<PAGE>
-46-
11. INDEMNITY. The Seller agrees to indemnify and hold harmless
the Purchaser and each of its Affiliates (including the respective officers,
directors, employees and agents of the Purchaser and its Affiliates) (each, a
"SELLER INDEMNIFIED PERSON") from and against any and all expenses, claims,
liabilities, losses, damages, obligations, penalties, fines, costs and
disbursements of any kind or nature (collectively, "LOSSES") (or actions or
suits in respect thereof) in any way resulting from, related to or arising out
of or in connection with a breach by the Seller of any of its representations or
warranties made herein or in any Schedule, Exhibit or other appendix hereto or
any material misstatement contained in or any material omission from the Proxy
Statement or any Issuer Tender Offer Document or any of the transactions
contemplated hereby or thereby (each, a "SELLER INDEMNIFIED MATTER"), and to
reimburse from time to time upon demand therefor, each Seller Indemnified Person
for any actual or threatened legal and other expenses incurred by it in
connection with or relating to investigating, preparing to defend or defending
any actions, claims or other proceedings (including any investigation or
inquiry) arising in any manner out of or in connection with a Seller Indemnified
Matter (whether or not such Seller Indemnified Person is named party in such
action, claim or proceeding); PROVIDED, HOWEVER, that the Seller shall not
be responsible to any Seller Indemnified Person for any Losses to the extent
that it is finally judicially determined by a court of competent jurisdiction
that such Losses result solely and directly from the gross negligence or willful
misconduct of the Seller Indemnified Person.
The Purchaser agrees to indemnify and hold harmless the Seller and
each of its Affiliates (including the respective officers, directors, employees
and agents of the Seller and its Affiliates) (each, a "PURCHASER INDEMNIFIED
PERSON") from and against any and all Losses (or actions or suits in respect
thereof) in any way resulting from, related to or arising out of or in
connection with a breach by the Purchaser of its representations and warranties
made herein or any material misstatement contained in or any material omission
from factual information with respect to the Purchaser furnished in writing by
the Purchaser to the Seller specifically for inclusion in the Proxy Statement or
any Issuer Tender Offer Document (each, a "PURCHASER INDEMNIFIED MATTER"), and
to reimburse, from time to time upon demand therefor, each Purchaser Indemnified
Person for any actual or threatened legal and other expenses incurred by it in
connection with or relating to investigating, preparing to defend or defending
any actions, claims or other proceedings (including any investigation or
inquiry) arising in
<PAGE>
-47-
any manner out of or in connection with a Purchaser Indemnified Matter (whether
or not such Purchaser Indemnified Person is a named party in such action, claim
or proceeding); PROVIDED, HOWEVER, that the Purchaser shall not be
responsible to any Purchaser Indemnified Person for any Losses to the extent
that it is finally judicially determined by a court of competent jurisdiction
that such Losses result solely and directly from the gross negligence or willful
misconduct of the Purchaser Indemnified Person.
The indemnification and expense reimbursement obligations in this
Section 11 shall terminate and be of no further force and effect after December
31, 1996, except with respect to any claim, action, suit or proceeding as to
which the party seeking indemnification shall have given written notice to the
indemnifying party on or prior to December 31, 1996. No Seller Indemnified
Person or Purchaser Indemnified Person seeking indemnity hereunder shall settle
any matter without the prior consent of the indemnifying person (which consent
shall not be unreasonably withheld).
12. MISCELLANEOUS.
12.1 NOTICES. All notices or other communications given or made
hereunder shall be validly given or made if in writing and delivered by
facsimile transmission or in person at, or mailed by registered or certified
mail, return receipt requested, postage prepaid, to, the following addresses
(and shall be deemed effective at the time of receipt thereof).
If to the Seller:
IN HOME HEALTH, INC.
Carlson Center, Suite 500
601 Lakeshore Parkway
Minnetonka, Minnesota 55305-5214
Attention: President
Facsimile #: (612) 449-7599
with a copy to:
Lindquist & Vennum
4200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
Attention: Richard D. McNeil
Facsimile #: (612) 371-3207
<PAGE>
-48-
If to the Purchaser:
MANOR HEALTHCARE CORP.
10750 Columbia Pike
Silver Spring, Maryland 20901
Attention: President, Alternate Site Division
Facsimile #: (301) 905-4586
with a copy to:
Manor Healthcare Corp.
10750 Columbia Pike
Silver Spring, Maryland 20901
Attention: General Counsel
Facsimile: (301) 905-4029
or to such other address as the party to whom notice is to be given may have
previously furnished notice in writing to the other in the manner set forth
above.
12.2 EXPENSES. Each party shall bear its own expenses, including
the fees and expenses of any attorneys, accountants, investment bankers,
brokers, finders or other intermediaries or other persons engaged by it,
incurred in connection with this Agreement or the other Transaction Documents
contemplated hereby and the other transactions; PROVIDED, HOWEVER, that if
this Agreement is terminated by the Purchaser pursuant to any of Sections
8(b)(i)(x), 8(b)(i)(y) (if the breach serving as the basis for termination was
wilful), 8(b)(i)(z), 8(b)(ii), 8(b)(iii) or 8(b)(iv) or by the Seller pursuant
to Section 8(c)(ii), the Seller shall promptly pay to the Purchaser an amount
equal to $1,300,000, which amount is inclusive of all of the Purchaser's costs
and expenses and related time and effort in investigating, negotiating,
preparing, entering into and performing this Agreement and the transactions
contemplated herein. Any payment required to be made pursuant to this Section
12.2 shall be made as promptly as practicable but not later than three business
days after termination of this Agreement and shall be made by wire transfer of
immediately available funds to an account designated by the Purchaser.
12.3 REMEDIES. (a) Each of the Seller and the Purchaser
acknowledges that the other party would not have an adequate remedy at law for
money damages in the event that any of the covenants or agreements of the other
party in this
<PAGE>
-49-
Agreement were not performed in accordance with its terms, and it is therefore
agreed that each of the Purchaser and the Seller, in addition to and without
limiting any other remedy or right it may have, will have the right to an
injunction or other equitable relief in any court of competent jurisdiction
(subject to Section 12.4) enjoining any such breach and enforcing specifically
the terms and provisions hereof, and each of the Purchaser and the Seller hereby
waive any and all defenses they may have on the ground of lack of jurisdiction
or competence of the court to grant such an injunction or other equitable
relief.
(b) All rights, powers and remedies provided under this Agreement
or otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
12.4 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
Trial. (a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF MINNESOTA, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
(b) THE SELLER AND THE PURCHASER EACH HEREBY IRREVOCABLY AND
UNCONDITIONALLY: (i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, OR FOR
RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE
NON-EXCLUSIVE GENERAL JURISDICTION OF THE FEDERAL COURTS OF THE STATE OF
MINNESOTA; (ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND WAIVES TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT
OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND
AGREES NOT TO PLEAD OR CLAIM THE SAME; (iii) AGREES THAT SERVICE OF PROCESS IN
ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL),
POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN SECTION 12.1 OR AT SUCH OTHER
ADDRESS OF WHICH THE PURCHASER SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; AND
(iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN
FEDERAL COURT IN ANY OTHER JURISDICTION.
12.5 SEVERABILITY; INTERPRETATION. If any term, provision,
covenant or restriction of this Agreement is held by
<PAGE>
-50-
a court of competent jurisdiction to be invalid, void or unenforceable, each of
the Seller and the Purchaser directs that such court interpret and apply the
remainder of this Agreement in the manner which it determines most closely
effectuates their intent in entering into this Agreement, and in doing so
particularly take into account the relative importance of the term, provision,
covenant or restriction being held invalid, void or unenforceable.
12.6 HEADINGS. The index and section headings herein are for
convenience only and shall not affect the construction hereof.
12.7 ENTIRE AGREEMENT. This Agreement and the other Transaction
Documents and the schedules, exhibits, annexes and appendices hereto and thereto
embodies the entire agreement between the parties relating to the subject matter
hereof and thereof and any and all prior oral or written agreements,
representations or warranties, contracts, understandings, correspondence,
conversations, and memoranda, whether written or oral, between the Purchaser and
the Seller or between or among any agents, representatives, parents,
subsidiaries, affiliates, predecessors in interest or successors in interest,
with respect to the subject matter hereof, are merged herein and replaced
hereby.
12.8 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
12.9 MODIFICATION OR AMENDMENT. At any time prior to the Closing
Date or thereafter, the parties hereto may modify or amend this Agreement, by
written agreement executed and delivered by duly authorized officers of the
respective parties.
12.10 WAIVER. The conditions to each of the parties' obligations
to consummate the transactions contemplated hereby and to perform the acts
contemplated on its part hereunder are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law. No failure or delay by any party in insisting upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
in exercising any right or remedy consequent upon breach thereof shall
constitute a waiver of any such breach or of any other covenant, duty, agreement
or condition, any such waiver being made only by a written instrument executed
and delivered by the waiving party.
<PAGE>
-51-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
IN HOME HEALTH, INC.
By:
-----------------------------------
Name:
Title:
MANOR HEALTHCARE CORP.
By:
-----------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK OR
OTHER SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, OR (ii) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER. ANY SALE
PURSUANT TO CLAUSE (ii) OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IN HOME HEALTH, INC. TO THE EFFECT
THAT SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH
SALE.
VOID AFTER 5:00 P.M. MINNEAPOLIS, MINNESOTA
TIME ON , 1998
[Three years after the Closing Date]
IN HOME HEALTH, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
, 1995
THIS IS TO CERTIFY THAT, FOR VALUE RECEIVED, Manor Healthcare Corp.,
or its assigns (the "HOLDER"), is entitled to purchase, subject to the
provisions of this warrant (the "WARRANT," such term to include any warrant
issued in substitution therefor), from In Home Health, Inc., a Minnesota
corporation (the "COMPANY"), Six Million (6,000,000) duly authorized, validly
issued, fully paid and nonassessable shares (the "INITIAL SHARES") of the
common stock, par value $.01 per share, of the Company (the "COMMON STOCK") at
a purchase price of $3.75 per share (the "INITIAL WARRANT EXERCISE PRICE") at
any time or from time to time during the period from the date hereof to ,
1998 (the "EXPIRATION DATE"). The number of Shares to be received upon the
exercise of this Warrant and the price to be paid for each Share may be adjusted
from time to time as hereinafter set forth. (The Initial Shares deliverable
upon such exercise, and as adjusted from time to time, are referred to herein as
"SHARES" and the exercise price for a Share in effect at any time and as
adjusted from time to time is hereinafter referred to as the "EXERCISE
Price".) References to the "COMPANY" herein shall include successors to the
Company as contemplated by Section (i) below.
(a) EXERCISE OF WARRANT. This Warrant may be exercised by the
Holder in whole or in part at any time or from time to time on or after the date
hereof to , 1998; PROVIDED, HOWEVER, if the Expiration Date is a day
on which banking institutions in the State of New York are authorized by law to
close, then on the next succeeding day which shall not be such a day. This
Warrant may be exercised by presentation and surrender hereof to the Company at
<PAGE>
-2-
its principal office, or at the office of its transfer agent, if any, with the
Purchase Form annexed hereto duly executed and accompanied by payment of the
Exercise Price by certified or bank cashier's check for the number of Shares
specified in such Purchase Form. As soon as practicable after each such
exercise of the Warrant, but not later than seven (7) days from the date of such
exercise, the Company shall issue and deliver to the Holder a certificate or
certificates for the Shares issuable upon such exercise, registered in the name
of the Holder or its designee. If this Warrant should be exercised in part
only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the Warrant Shares purchasable hereunder. Upon receipt
by the Company of this Warrant at its office, or by the stock transfer agent of
the Company at its office, in proper form for exercise, the Holder shall be
deemed to be the holder of record of the Shares issuable upon such exercise,
notwithstanding that the stock transfer books for the Company shall then be
closed or that certificates representing such Shares shall not then be
physically delivered to the Holder. The Company will, at the time of each
exercise of this Warrant, upon the request of the Holder, acknowledge in writing
its continuing obligation to afford to the Holder all rights (including without
limitation any rights to registration of the Shares issued upon such exercise
pursuant to that certain Registration Rights Agreement dated as of _______, 1995
by and between the Company and the Holder (the "REGISTRATION RIGHTS
AGREEMENT")) to which the Holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant and the Registration
Rights Agreement; PROVIDED, HOWEVER, that if the Holder shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford such rights to the Holder.
(b) ISSUANCE OF SHARES. The Company covenants that at all times
it shall have the authority to issue and/or deliver upon exercise of this
Warrant such number of authorized Shares as shall be required for issuance and
delivery upon exercise of the Warrants. The Company covenants that all Shares
which shall be issuable upon exercise of the Warrants shall, at the time of
delivery, be duly authorized and validly issued, fully paid, nonassessable, free
from all taxes, liens and charges with respect to the issue thereof.
(c) FRACTIONAL SHARES. No fractional Shares or scrip representing
fractional Shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a Share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the then
<PAGE>
-3-
current market value of a share of Common Stock, determined in accordance with
Section (f)(8) below (except that the determination shall be based on the
current market value of a share of Common Stock on the last trading day before
the date of exercise and not on an average over the preceding twenty trading
days as otherwise contemplated by Section (f)(8)).
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.
(1) This Warrant is exchangeable without expense, at the option of the
Holder, upon presentation and surrender hereof to the Company or at
the office of its transfer agent, if any, for other Warrants of
different denominations but of like tenor entitling the holder(s)
thereof to purchase in the aggregate the same number of Shares
purchasable hereunder.
(2) The Company may treat the person in whose name any Warrant is
registered on the register kept at the office of the Company or its
transfer agent, if any, as the owner and holder thereof for all
purposes, notwithstanding any notice to the contrary, except that,
if and when any Warrant is properly assigned in blank, the Company
may (but shall not be obligated to) treat the bearer thereof as the
owner of such Warrant for all purposes, notwithstanding any notice
to the contrary. A Warrant, if properly assigned, may be exercised
by a new holder without a new Warrant first having been issued. The
Company shall cause to be kept at its principal office or at the
office of its transfer agent, if any, a register for the
registration and transfer of Warrants. The names and addresses of
holders of Warrants, the transfers thereof and the names and
addresses of transferees of Warrants shall be registered in such
register. The Holder will not make any transfers of this Warrant
except pursuant to an effective registration statement or under an
applicable exemption from registration under the Securities Act of
1933. The Holder agrees to notify the Company promptly following
any transfer of any Warrant; PROVIDED, HOWEVER, that the
failure to give such notice will not affect the effectiveness of a
transfer that is made otherwise in compliance with the terms hereof.
(3) Upon surrender of this Warrant to the Company at its principal
office or at the office of its transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds sufficient to
pay any transfer tax,
<PAGE>
-4-
the Company shall, without charge, execute and deliver a new Warrant
in the name of the assignee named in such instrument of assignment
and this Warrant shall promptly be cancelled. This Warrant may be
divided or combined with other Warrants which carry the same rights
upon presentation hereof at the principal office of the Company or
at the office of its stock transfer agent, if any, together with a
written notice specifying the names and denominations in which new
Warrants are to be issued and signed by the Holder hereof. (The
term "WARRANT" as used herein includes any Warrants into which
this Warrant may be divided or exchanged.)
(4) Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and (in the
case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company at its expense will execute and
deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not this Warrant
so lost, stolen, destroyed, or mutilated shall be at any time
enforceable by anyone.
(e) RIGHTS OF ACTION. All rights of action with respect to the
Warrant are vested in the Holder (or its respective assigns) and the Holder of
the Warrant without consent of the holder of any other Warrant, may, in its own
behalf and for its own benefit, enforce against the Company its rights to
exercise the Warrant for the purchase of Shares in the manner provided herein.
The Company stipulates that the remedies at law of the holder of this Warrant in
the event of any default or threatened default by the Company in the performance
of or compliance with any of the terms of this Warrant or under the Registration
Rights Agreement are not and will not be adequate and that, to the fullest
extent permitted by law, such terms may be specifically enforced by a decree for
the specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
(f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the happening of
certain events at any time after May 2, 1995 as follows:
<PAGE>
-5-
(1) In case the Company shall (i) make a distribution on its outstanding
Common Stock in shares of Common Stock; (ii) subdivide or reclassify
its outstanding shares of Common Stock into a greater number of
shares; or (iii) combine or reclassify its outstanding shares of
Common Stock into a smaller number of shares, then the Exercise
Price in effect at the time of the record date for such distribution
or the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the same
shall equal the price determined by multiplying the Exercise Price
in effect immediately prior to such date by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such record date or effective date
and the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such distribution, subdivision,
combination or redistribution; provided, that, if as a result of a
reclassification the Company's Common Stock shall no longer be
outstanding, the Holder of this Warrant shall be entitled to receive
the aggregate number and kind of equity securities which, if this
Warrant had been exercised by such Holder immediately prior to the
effective date of such reclassification, the Holder would have been
entitled to receive upon such reclassification with respect to
Shares acquired upon such exercise.
(2) In case the Company shall fix a record date for the issuance of
rights or warrants to holders of its shares of Common Stock
entitling them to subscribe for or purchase shares of Common Stock
(or securities convertible into or exercisable for shares of Common
Stock) at a price (or having a conversion or exercise price per
share) less than the current market price of a share of Common Stock
(as defined in Subsection (8) below) on the last date on which a
regular way trade of the Common Stock would result in a purchaser
being a holder of record on the record date mentioned below (the
"EX-DIVIDEND DATE"), the Exercise Price shall be adjusted so that
the same shall equal the price determined by multiplying the
Exercise Price in effect immediately prior to the date of such
issuance by a fraction, the numerator of which shall be the sum of
the number of shares of Common Stock outstanding on the record date
mentioned below and the number of additional shares which the
aggregate offering price of the total number of shares so offered
(or the aggregate conversion or exercise price of the securities so
offered) would
<PAGE>
-6-
purchase at the current market price per share of Common Stock (as
defined in Subsection (8) below), and the denominator of which shall
be the sum of the number of shares of Common Stock outstanding on
the record date mentioned below and the number of additional shares
offered for subscription or purchase (or into which the securities
so offered are convertible or for which they are exercisable). Such
adjustment shall be made successively whenever such rights or
warrants are issued and shall become effective immediately after the
record date for the determination of shareholders entitled to
receive such rights or warrants; and, to the extent that shares are
not delivered (or securities convertible into or exercisable for
shares are not delivered), after the expiration of such rights or
warrants the Exercise Price shall be readjusted to the Exercise
Price which would then be in effect had the adjustments made upon
the issuance of such rights or warrants been made upon the basis of
delivery of only the number of shares (or securities convertible
into or exercisable for shares) actually delivered.
(3) In case the Company shall distribute to the holders of its Common
Stock evidences of its indebtedness or assets (excluding regular
quarterly cash dividends in the ordinary course and distributions
referred to in Subsection (1) above, but including other cash
dividends or distributions and dividends or distributions of shares
of capital stock other than Common Stock) or subscription rights or
warrants (excluding those referred to in Subsection (2) above), then
in each such case the Exercise Price in effect thereafter shall be
determined by multiplying the Exercise Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the
total number of shares of Common Stock outstanding on the record
date for the distribution multiplied by the current market price per
share of Common Stock (as defined in Subsection (8) below) on the
record date for such distribution, less the fair market value (as
determined in good faith by the Board of Directors of the Company)
of said assets or evidences of indebtedness so distributed or of
such rights or warrants, and the denominator of which shall be the
total number of shares of Common Stock outstanding on the record
date for the distribution multiplied by such current market price
per share of Common Stock on the record date for such distribution.
Such adjustment shall be made successively whenever such a record
date is fixed. Such adjustment
<PAGE>
-7-
shall be made whenever any such distribution is made and shall
become effective immediately after the record date for the
determination of shareholders entitled to receive such distribution.
(4) In case the Company shall issue shares of Common Stock (excluding
shares of Common Stock issued (i) in any of the transactions
described in Subsection (1) above and (ii) upon exercise of stock
options outstanding May 2, 1995 or granted on the date of this
Warrant) for no consideration or for a consideration per share of
Common Stock less than the current market price per share (as
defined in Subsection (8) below) on the date the Company fixes the
offering price of such additional shares of Common Stock, the
Exercise Price in effect thereafter shall equal the price determined
by multiplying the Exercise Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the sum of
the number of shares of Common Stock outstanding immediately prior
to the issuance of such additional shares of Common Stock and the
number of shares which the aggregate consideration received
(determined as provided in Subsection (7) below) for the issuance of
such additional shares of Common Stock would purchase at such
current market price per share, and the denominator of which shall
be the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares of Common Stock. Such
adjustment shall be made successively whenever such an issuance is
made.
(5) In case the Company shall issue any securities convertible into,
exercisable for or exchangeable for shares of Common Stock
(excluding securities issued in transactions described in
Subsections (2) and (3) above) for no consideration or for a
consideration per share of Common Stock initially deliverable upon
conversion, exercise or exchange of such securities (determined as
provided in Subsection (7) below) less than the current market price
per share of Common Stock (as defined in Subsection (8) below)
immediately prior to the issuance of such securities, the Exercise
Price shall be adjusted immediately thereafter so that it shall
equal the price determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, the numerator of
which shall be the sum of the number of shares of Common Stock
outstanding immediately prior to the issuance of such securities and
the number of shares of Common Stock which the aggregate
consideration received (determined as
<PAGE>
-8-
provided in Subsection (7) below) for such securities would purchase
at such current market price per share immediately prior thereto,
and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such
issuance and the maximum number of shares deliverable upon
conversion of, exercise for, or in exchange for such securities at
the initial conversion, exercise or exchange price or rate. Such
adjustment shall be made successively whenever such an issuance is
made.
(6) Whenever the Exercise Price payable upon exercise of this Warrant is
adjusted pursuant to Subsections (1), (2), (3), (4) and (5) above,
the number of shares of Common Stock purchasable upon exercise of
this Warrant shall simultaneously be adjusted by multiplying the
number of Shares issuable upon exercise of this Warrant immediately
preceding the adjustment by the Exercise Price in effect immediately
preceding the adjustment and dividing the product so obtained by the
Exercise Price, as adjusted.
(7) For purposes of any computation respecting consideration received
pursuant to Subsection (4) and (5) above, the following shall apply:
(A) In the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the
Company for any underwriting of the issue or otherwise in
connection therewith;
(B) In the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board
of Directors of the Company (irrespective of the accounting
treatment thereof), whose determination, absent manifest
error, shall be conclusive; and
(C) In the case of the issuance of securities convertible into,
exercisable for or exchangeable for shares of Common Stock,
the aggregate consideration received therefor shall be deemed
to be the consideration received by the Company for the
issuance of such securities plus the additional
<PAGE>
-9-
minimum consideration, if any, to be received by the Company
upon the conversion, exercise or exchange thereof (the
consideration in each case to be determined in the same manner
as provided in clauses (a) and (b) of this Subsection (7)).
(8) For the purpose of any computation under Subsections (2), (3), (4)
and (5) above, the current market price per share of Common Stock at
any date shall be deemed to be the average of the daily closing
prices for 20 consecutive trading days ending on the trading day
immediately prior to such date. The closing price for each day
shall be the last sale price regular way or, in the case no such
reported sale takes place on such day, the average of the last
reported bid and asked prices regular way, in either case on the
principal national securities exchange or the Nasdaq National Market
on which the Common Stock is listed or admitted for trading, or, if
the Common Stock is not listed or admitted for trading on a national
securities exchange or the Nasdaq National Market, the closing price
for each day shall be the average of the highest reported bid and
lowest reported asked prices on such day as reported by Nasdaq or
other similar organizations if Nasdaq is no longer reporting such
information, or, if such information is not so available, the fair
market price as determined in good faith by the Board of Directors
of the Company.
(9) All calculations under this Section (f) shall be made to the nearest
one-tenth of a cent or to the nearest one-hundredth of a share, as
the case may be.
(10) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable upon exercise
of each Warrant to be mailed to the Holder, at its last address
appearing in the Warrant register, and shall cause a certified copy
thereto to be mailed to its transfer agent, if any. The Company may
retain a firm of independent certified public accountants selected
by the Board of Directors of the Company (who may be the regular
accountants employed by the Company) to make any computation
required by this Section (f) (other than any computation of the fair
value of property as determined in good faith by the Board of
Directors of the Company), and a certificate signed by
<PAGE>
-10-
such firm shall be conclusive evidence of the correctness of such
adjustment.
(11) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (1) above, the Holder of this Warrant
thereafter shall become entitled to receive any equity securities of
the Company, other than shares of Common Stock, thereafter the
number of such other equity securities so receivable upon exercise
of this Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares of Common Stock contained in
Subsections (1) to (9), inclusive above.
(12) Irrespective of any adjustments in the Exercise Price or the number
of kind of shares purchasable upon exercise of this Warrant, each
Warrant theretofore or thereafter issued may continue to express the
same price and number and kind of shares as are stated in this
Warrant.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing Section (f), the Company
shall forthwith file at its principal office and with its transfer agent, if
any, a certificate showing the adjusted Exercise Price determined as herein
provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of additional shares of Common
Stock, if any, and such other facts as shall be necessary to show the reason for
and the manner of computing such adjustment. Each such officer's certificate
shall be made available at all reasonable times for inspection by the Holder or
any holder of a Warrant executed and delivered pursuant to Section (a) hereof
and the Company shall, forthwith after each such adjustment, mail a copy by
certified mail of such certificate to the Holder or any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding (i) if the Company shall make any distribution in shares of Common
Stock (other than dividends on the Company's preferred stock paid in shares of
Common Stock) or (ii) if the Company shall offer to the holders of shares of
Common Stock for subscription or purchase by them any share of any class or any
other right or (iii) if any capital reorganization of the Company,
reclassification of the Common Stock or other equity interests in the Company,
sale, lease or transfer of all or substantially all of the property and assets
of the Company to another entity, merger or consideration with another entity,
or the voluntary or involuntary
<PAGE>
-11-
dissolution or liquidation of the Company shall be effected, then in any such
case, the Company shall cause to be mailed by certified mail to the Holder, at
least fifteen days prior to the date specified in (x) or (y) below, as the case
may be, a notice containing a brief description of the proposed action and
stating the date on which (x) a record is to be taken for the purpose of such
dividend, distribution or rights or (y) such reclassification, reorganization,
conveyance, lease, merger or consolidation, dissolution or liquidation is to
take place and the date, if any is to be fixed, as of which the holders of
shares of Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, conveyance, dissolution
or liquidation.
(i) RECLASSIFICATION, REORGANIZATION OR RELATED ACTIVITIES. In
case of any reclassification, capital reorganization or other similar activity
which results in a change in the outstanding shares of Common Stock or in case
of the merger or consolidation of the Company with another entity or any sale,
assignment, lease or conveyance to another entity of all or substantially all of
the property or assets of the Company in one or a series of related
transactions, the Company shall, as a condition precedent to such transaction,
cause effective provisions to be made so that the Holder shall have the right
thereafter by exercising this Warrant at any time prior to the expiration of the
Warrant, to purchase the kind and amount of shares and other securities and
property receivable upon such reclassification, capital reorganization or
similar activity, change, merger or consolidation, or sale, assignment, lease or
conveyance which would have been received had this Warrant been exercised
immediately prior to such reclassifications, capital reorganization, similar
activity, change, merger or consolidation, or sale, assignment, lease or
conveyance. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this Section (i) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares and to successive mergers or consolidations or sales,
assignments, leases or conveyances. In the event that in connection with any
such capital reorganization, reclassification or related change, merger or
consolidation or sale, assignment, lease or conveyance, provision is made for
the substitution or payment, in whole or in part, for the Common Stock of the
Company of a different security of the Company, any such issuance shall be
treated as a reclassification covered by the provisions of Subsection (1) of
Section (f) above.
<PAGE>
-12-
In case any event shall occur as to which the provisions of Section
(f) hereof are not strictly applicable but the failure to make any adjustment
would not, in the opinion of the Holder, fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such Section, then, in each such case, at the request of the
Holder, the Company shall appoint a firm of independent certified public
accountants of recognized national standing (which may be the regular auditors
of the Company), which shall give their opinion upon the adjustment, if any, on
a basis consistent with the essential intent and principles established in
Section (f) hereof, necessary to preserve, without dilution, the purchase rights
represented by this Warrant. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments, if any, described therein.
The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (a) will not permit the par value of any shares of stock receivable
upon the exercise of this Warrant to exceed the amount payable therefor upon
such exercise, (b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of the Warrants from time to time
outstanding, and (c) will not take any
action which results in any adjustment of the Exercise Price if the total
number of shares of Common Stock (or other securities) issuable after the action
upon the exercise of all of the Warrants would exceed the total number of shares
of Common Stock (or other securities) then authorized by the Company's
certificate of incorporation and available for the purpose of issue upon such
exercise.
(j) GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THAT STATE WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(k) ASSIGNMENT. This Warrant may be transferred or assigned by
the Holder or any subsequent holder as provided herein.
<PAGE>
-13-
The Company may not assign its obligations hereunder except to the extent
permitted in Section (i).
IN HOME HEALTH, INC.
By:____________________________
Its:___________________________
Attest:
_____________________
Title:
<PAGE>
PURCHASE FORM
Dated: _______, 19__
The undersigned hereby irrevocably elects to exercise the within Warrant to the
extent of purchasing an aggregate of_________ shares of Common Stock of In Home
Health, Inc. (the "SHARES") and hereby makes payment of $_________. A new
Warrant covering _______ shares should be issued to the undersigned.
INSTRUCTION FOR REGISTRATION OF SHARES
Name___________________________________________________________
(Please typewrite or print in block letters)
Address________________________________________________________
Signature_________________________________________________
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED,_____________________________________________________________
hereby sells, assigns and transfers unto
Name____________________________________________________________________________
(Please typewrite or print in block letters)
Address_________________________________________________________________________
the right to purchase shares represented by this Warrant to the extent of_______
shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint_____________ Attorney, to transfer the same on the books
of the Company with full power of substitution in the premises.
Dated: ______________, 19__
Signature_________________
<PAGE>
EXHIBIT B
CERTIFICATE OF DESIGNATION
Certificate of Designation
of
the Series, Number of Shares in the Series, Dividend Rate,
Redemption Price, Liquidation Price, Conversion Right
and Other Rights and Preferences
of the
SERIES A PREFERRED STOCK
($1.00 PAR VALUE)
OF
IN HOME HEALTH, INC.
$100.00 LIQUIDATION PREFERENCE PER SHARE
Pursuant to Section 302A.401, Minnesota Statutes
The undersigned, Judy M. Figge, the President of In Home Health,
Inc. (the "COMPANY"), a corporation subject to the Minnesota Business
Corporation Act (Chapter 302A, Minnesota Statutes), does hereby certify that at
a special meeting of the Board of Directors of said corporation duly held on May
2, 1995, the following resolution was duly adopted pursuant to Section 302A.401,
Minnesota Statutes:
RESOLVED, that there is hereby established a series of Preferred
Stock having the relative rights and preferences that are set forth
below:
ARTICLE I
Section 101. Designation.
(a) This series of Preferred Stock shall be known as the "Series A
Preferred Stock," par value $1.00 per share (the "PREFERRED STOCK").
(b) The Preferred Stock shall consist of up to 200,000 shares,
which number shall not be increased but may be decreased (but not below the
number of shares of Preferred Stock then outstanding) from time to time by a
resolution or resolutions of the Board of Directors. Shares of Preferred Stock
redeemed or purchased by the Company or converted into Common Stock shall be
cancelled and shall revert to authorized but unissued shares undesignated as
to series or class upon compliance with the applicable provisions of law.
<PAGE>
-2-
Section 102. Ranking.
The Preferred Stock shall rank senior to the Common Stock as to the
payment of dividends and the distribution of assets on liquidation, dissolution
and winding up of the affairs of the Company. Each share of Preferred Stock
shall rank on a parity with or senior to each other series of preferred stock,
other than any junior stock, which may be hereafter issued by the Company in the
payment of dividends and in the distribution of assets on any liquidation,
dissolution or winding up of the Company.
Section 103. Definitions.
As used herein with respect to Preferred Stock, the following terms
shall have the following meanings:
(a) the term "JUNIOR STOCK" shall mean the Common Stock and any
other class or series of stock of the Company hereafter authorized or issued
over which Preferred Stock has preference or priority in (i) the payment of
dividends and (ii) the distribution of assets on any liquidation, dissolution or
winding up of the Company.
(b) the term "COMMON STOCK" shall mean the class of stock
designated as the common stock, par value $.01 per share, of the Company at the
date of the adoption of this resolution or any other class of stock resulting
from successive changes or reclassifications of such common stock.
(c) the term "EXCHANGE ACT" shall mean the Securities Exchange
Act of 1934, as amended, or any successor provision of law.
ARTICLE II
Section 201. Dividends.
The annual rate of dividends payable on each share of Preferred
Stock shall be 12% of the liquidation value thereof.
All dividends declared on the Preferred Stock shall be paid when, as
and if declared by the Company's Board of Directors out of funds legally
available therefor in cash on the business day preceding the last business day
of each March, June, September and December of each year commencing with
[ ], 1995 (each a "QUARTERLY DIVIDEND PAYMENT DATE"). Dividends on all
shares of Preferred Stock shall accrue on a daily basis whether or not there
shall be funds legally available therefor. Dividends on the
<PAGE>
-3-
Preferred Stock shall begin to accrue and be cumulative from the date of
original issue of the Preferred Stock. The Board of Directors may fix a record
date for the determination of holders of shares of Preferred Stock entitled to
receive payments of a dividend declared thereon, which record date shall be no
more than 60 days nor less than 10 days prior to the date fixed for the payment
thereof.
Section 202. Cumulation of Dividends.
Accrued but unpaid dividends on the Preferred Stock shall cumulate
as of the Quarterly Dividend Payment Date on which they first became payable;
PROVIDED, HOWEVER, that (i) if any applicable dividend payment is not made
on a Quarterly Dividend Payment Date, (ii) any redemption payment is not made on
a Redemption Date (as defined in Article IV), (iii) any repurchase payment is
not made or a Repurchase Date (as defined in Article IV), or (iv) any payment of
accrued and unpaid dividends is not paid upon the conversion of the Preferred
Stock as provided in Article V, respectively, thereafter the holders of the
Preferred Stock shall be entitled to additional dividends which shall accrue in
respect of all such dividend payments, redemption payments, repurchase payments
and conversions that are past due and unpaid at the rate of 12% PER ANNUM
compounded quarterly, with the amount of such additional dividends added to
accrued dividend payments, redemption payments, repurchase payments or payments
related to conversions, respectively, until all such dividend payments,
redemption payments, repurchase payments or payments related to conversions
shall have been paid in full (or declared and funds sufficient therefor set
apart for payment). Past due dividends and additional dividends accrued with
respect thereto may be paid at any time.
Section 203. Dividend Preference Over Junior Stock.
No dividends, whether in cash or property, may be paid upon or
declared and set aside for or distributed to the holders of any junior stock
unless and until all current and accumulated cash dividends payable pursuant to
Sections 201 and 202 on shares of Preferred Stock shall have been paid or
declared and funds for payment thereof shall have been set aside.
Section 204. Dividend Preference on Parity Stock.
No dividends may be paid to or declared or set aside for the benefit
of holders of any class or series of stock of the Company ranking on a parity
with the Preferred Stock in the payment of dividends if at that time there shall
be any current or accumulated cash dividends payable pursuant to Sections 201
and
<PAGE>
-4-
202, unless at the same time a like proportionate dividend, pro rata based on
the annual dividend rates of the Preferred Stock and such parity stock, shall at
the same time be paid to or declared and set aside for the benefit of holders of
the Preferred Stock then issued and outstanding and entitled to receive such
dividend.
Section 205. Redemption of Shares.
No shares of junior stock, parity stock or Preferred Stock may be
purchased, redeemed or otherwise acquired for value by the Company or any
subsidiary thereof, whether by way of direct payment or sinking fund, unless all
dividends accrued on the Preferred Stock under Sections 201 or 202 shall have
been paid or declared and funds for payment thereof set aside.
Section 206. Permitted Transactions.
Subject only to the limitations imposed by law, the Articles of
Incorporation (as amended or further restated from time to time) or appropriate
action of the Board of Directors, nothing contained in this Article II shall
prohibit the making of: (i) a distribution of junior stock with respect to or
in exchange for other junior stock; or (ii) any exchange of stock, distribution
or payment of any dividend with respect to junior stock after the Company shall
have paid, or set aside funds for payment of, all dividends accrued, through the
most recent dividend payment date under Section 201, on the Preferred Stock. No
holder of shares of Preferred Stock shall be entitled to share in any such
distribution, payment or exchange.
Section 207. Payment of Dividends in Common Stock.
(a) The Company shall have the right, but not the obligation, to
make an irrevocable election by written notice delivered to the holders of
Preferred Stock not fewer than five business days prior to the relevant
Quarterly Dividend Payment Date, to pay any accrued and unpaid dividends on the
Preferred Stock by delivering to the holders of the Preferred Stock such number
of shares of Common Stock, valued at the Fair Market Value thereof, equal to the
amount of such accrued and unpaid dividends so elected to be paid in shares of
Common Stock. In addition the Company shall have the right, but not the
obligation, to make an irrevocable election by written notice delivered to the
holders of Preferred Stock not fewer than five business days prior to the date
payment is to be made, to pay any accumulated dividends on the Preferred Stock
by delivering to the holders of the Preferred Stock such number of shares of
Common Stock, valued at the Fair Market
<PAGE>
-5-
Value thereof, equal to the amount of such accumulated dividends so elected to
be paid in shares of Common Stock.
The "FAIR MARKET VALUE" per share of Common Stock at any date
shall be deemed to be the average of the daily closing prices for 20 consecutive
trading days ending on the trading day immediately prior to the date of any
notice given pursuant to this Section 207. The closing price for each day shall
be the last sale price regular way or, in the case no such reported sale takes
place on such day, the average of the last reported bid and asked prices regular
way, in either case on the principal national securities exchange or the Nasdaq
National Market on which the Common Stock is listed or admitted for trading, or,
if the Common Stock is not listed or admitted on a national securities exchange
or the Nasdaq National Market, the closing price for each day shall be the
average of the highest reported bid and lowest reported asked prices on such day
as reported by Nasdaq or other similar organizations if Nasdaq is no longer
reporting such information, or, if such information is not so available, the
fair market price as determined in good faith by the Board of Directors of the
Company.
Any such notice delivered pursuant to this Section 2.07 shall state
that it is a notice under this Section 2.07, whether it is a notice of election
to pay accrued and unpaid dividends or accumulated dividends in shares of Common
Stock, the date such shares of Common Stock are to be delivered, the amount of
accrued and unpaid dividends or accumulated dividends to be paid in Common Stock
and the Fair Market Value of the Common Stock to be delivered in respect of such
accrued and unpaid dividends or accumulated dividends.
ARTICLE III
Section 301. Liquidation Preference ($100.00 per share).
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, then, before any distribution or
payment shall be made to the holders of any junior stock, the holders of
Preferred Stock shall be entitled to be paid in full an amount equal to $100.00
per share, together with accrued and unpaid dividends and any accumulated
dividends to such distribution or payment date, whether earned or declared.
(b) If, upon any liquidation, dissolution or winding up of the
Company, such payment referred to in Section 301(a) shall have been made in full
to holders of Preferred Stock, the remaining assets and funds of the Company
shall be distributed among the
<PAGE>
-6-
holders of the junior stock, according to their respective rights and
preferences and in each case according to their respective shares. If, upon any
liquidation, dissolution or winding up of the Company, such payment referred to
in Section 301(a) shall not have been made in full to the holders of all
outstanding shares of Preferred Stock, the holders of Preferred Stock and all
other classes or series of stock of the Company ranking on a parity therewith in
the distribution of assets, shall share ratably in any distribution of assets in
proportion to the full amounts to which they would otherwise be respectively
entitled. Neither the consolidation nor the merger of the Company with or into
any other corporation or corporations, nor a reorganization of the Company
alone, nor the sale or transfer of all or any part of its assets, shall be
deemed a liquidation, dissolution or winding up of the Company within the
meaning of this Section 301.
Section 302. Notice of Liquidation.
Written notice of any voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, stating a payment date
and the place where the distributable amounts shall be payable and containing a
statement of or reference to the conversion right set forth in Section 501 shall
be given by the Company to the holders or holders of the Preferred Stock.
ARTICLE IV
Section 401. Redemption at Option of Company.
On any date (any such date, the "REDEMPTION DATE") on or after
[ ], 2000, the Company may, from time to time and at any time, redeem all or
any part of the outstanding shares of Preferred Stock (pro rata among the
holders) for cash, out of funds legally available therefor, at a price equal to
the liquidation preference per share, plus, in each case, accrued and unpaid
dividends and all accumulated dividends to the Redemption Date.
Notice of redemption of the Preferred Stock shall be mailed not less
than 30, but not more than 60, days prior to the Redemption Date to each holder
of shares of Preferred Stock, at such holder's address as it appears on the
transfer books of the Company.
<PAGE>
-7-
Section 402. Repurchase at Option of Holder.
Each holder of the Preferred Stock may, from time to time or at any
time, upon notice given as specified in this Section 402, require the Company to
repurchase on any date (any such date, the "REPURCHASE DATE") on or after
[ ], 2000 all or any portion of such holder's Preferred Stock for cash, out
of funds legally available therefor, at a price equal to the liquidation
preference per share, plus, in each case, accrued and unpaid dividends and all
accumulated dividends to the Repurchase Date.
Notice of a holder's election to require the Company to repurchase
any of such holder's Preferred Stock shall be delivered to the Company not less
than 30, but not more than 60, days prior to the Repurchase Date.
Section 403. Deposit of Redemption Price or Repurchase Price.
If on or before the applicable Redemption Date or the Repurchase
Date, as the case may be, the redemption price or the repurchase price, as the
case may be, together with accrued and unpaid dividends to the Redemption Date
or the Repurchase Date, as the case may be, shall have been set aside by the
Company, separate and apart from its other funds, in trust for the pro rata
benefit of the holders of the shares of Preferred Stock to be redeemed or
repurchased, as the case may be, on any such date so as to be and continued to
be available therefor, then, from and after the applicable Redemption Date or
Repurchase Date, as the case may be, notwithstanding that any certificate for
shares of Preferred Stock shall not have been surrendered for cancellation, the
shares represented thereby shall no longer be deemed outstanding, the dividends
thereon shall cease to accrue and accumulate, and all rights with respect to the
shares of Preferred Stock shall terminate on the applicable Redemption Date or
Repurchase Date, as the case may be, except only the right of the holders
thereof to receive the redemption price or repurchase price, as the case may be,
of the shares so redeemed, plus accrued and unpaid dividends and accumulated
dividends to the Redemption Date or Repurchase Date, as the case may be, but
without interest.
ARTICLE V
Section 501. Conversion.
(a) Subject to and upon compliance with the provisions of this
Section 501, at the option of the holder thereof, any share of the Preferred
Stock may be converted prior to the close of business on the business day prior
to the Redemption Date or
<PAGE>
-8-
Repurchase Date applicable to any such share into that number of fully paid and
nonassessable shares (calculated as to each conversion to the nearest 1/100 of a
share) of Common Stock equal to the number of shares of Preferred Stock to be
converted multiplied by a fraction, the numerator of which shall be equal to the
liquidation value for each share of Preferred Stock and the denominator of which
shall be the Conversion Price, determined as hereinafter provided, in effect at
the time of conversion of each share of Preferred Stock; PROVIDED, HOWEVER,
that if the Company shall default in the payment of the redemption price or the
repurchase price, as the case may be, of the Preferred Stock on the applicable
Redemption Date or the Repurchase Date, as the case may be, the right of
conversion shall continue until the Preferred Stock is so redeemed or
repurchased.
(b) The price at which shares of Common Stock shall be delivered
upon conversion (herein called the "CONVERSION PRICE") shall be initially
$2.00 per share of Common Stock.
(c) To convert shares of Preferred Stock into Common Stock, the
holder thereof shall surrender at the office of any transfer agent for the
Preferred Stock (or, if there be no transfer agent, at the principal office of
the Company) the certificate or certificates therefor, duly endorsed or
assigned to the Company, and give written notice to the Company at such office
that such holder elects to convert such shares. Such notice of conversion shall
specify (i) the number of shares of Preferred Stock to be converted and the name
or names in which such holder wishes the certificate or certificates for Common
Stock and for any shares of Preferred Stock not be so converted to be issued and
(ii) the address to which such holder wishes delivery to be made of such new
certificates to be issued upon such conversion. Shares of Preferred Stock shall
be deemed to have been converted immediately prior to the close of business on
the day of the surrender of such shares for conversion in accordance with the
foregoing provisions, and the person or persons entitled to receive the Common
Stock issuable upon conversion shall thereupon be treated for all purposes as
the record holder or holders of the Common Stock. As promptly as practicable on
or after the conversion date, the Company shall issue and shall deliver a
certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in lieu of any fractional share,
as hereinafter provided, to the person or persons entitled to receive the same.
In the event that there shall have been surrendered a certificate or
certificates representing shares of Preferred Stock, only part of which are to
be converted, the Company shall issue and deliver to such holder or such
holder's
<PAGE>
-9-
designee a new certificate or certificates representing the number of shares of
Preferred Stock which shall not have been converted.
(d) Upon conversion of any shares of Preferred Stock, no allowance
or adjustment shall be made for dividends accrued on the Common Stock issued
upon such conversion. On any conversion of the Preferred Stock, all accrued and
unpaid dividends to the date of conversion and all accumulated dividends on any
shares of Preferred Stock so converted shall be paid in full in cash to the
extent of funds legally available therefor. Any such dividends not so paid
shall be paid on the first date that funds are legally available therefor.
Section 502. Fractional Shares.
No fractional shares of Common Stock shall be issued upon the
conversion of Preferred Stock. If more than one certificate for Preferred Stock
shall be surrendered for conversion at one time by the same holder, the number
of full shares which shall be issuable upon conversion thereof shall be computed
on the basis of the aggregate number of shares so surrendered. Instead of any
fractional share of Common Stock which would otherwise be issuable upon
conversion of Preferred Stock, the Company shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the current
market price of Common Stock on the day of conversion (determined as provided in
paragraph (g) of Section 503).
Section 503. Adjustment of Conversion Price.
The Conversion Price in effect at any time and the number and kind
of securities purchasable upon the conversion of equal share of the Preferred
Stock shall be subject to adjustment from time to time upon the happening of
certain events at any time after May 2, 1995 as follows:
(a) In case the Company shall (i) make a distribution on its outstanding
Common Stock in shares of Common Stock; (ii) subdivide or reclassify
its outstanding shares of Common Stock into a greater number of
shares; or (iii) combine or reclassify its outstanding shares of
Common Stock into a smaller number of shares, then the Conversion
Price in effect at the time of the record date for such distribution
or the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the same
shall equal the price determined by multiplying the Conversion Price
in effect immediately prior to such date by a fraction, the
<PAGE>
-10-
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such record date or effective date
and the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such distribution, subdivision,
combination or redistribution; PROVIDED, HOWEVER, that, if as a
result of a reclassification the Company's Common Stock shall no
longer be outstanding, the holders of the Preferred Stock shall be
entitled to receive the aggregate number and kind of equity
securities which, if the Preferred Stock had been converted by such
holders immediately prior to the effective date of such
reclassification, the holders would have owned and been entitled to
receive upon such reclassification with respect to shares of Common
Stock acquired upon such conversion.
(b) In case the Company shall fix a record date for the issuance of
rights or warrants to holders of its shares of Common Stock
entitling them to subscribe for or purchase shares of Common Stock
(or securities convertible into or exercisable for shares of Common
Stock) at a price (or having a conversion or exercise price per
share) less than the current market price of a share of Common Stock
(as defined in paragraph (g) below) on the last day on which a
regular way trade of the Common Stock would result in a purchaser
being a holder of record on the record date mentioned below (the
"EX-DIVIDEND DATE"), the Conversion Price shall be adjusted so
that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of such
issuance by a fraction, the numerator of which shall be the sum of
the number of shares of Common Stock outstanding on the record date
mentioned below and the number of additional shares which the
aggregate offering price of the total number of shares so offered
(or the aggregate conversion or exercise price of the securities so
offered) would purchase at the current market price per share of
Common Stock (as defined in paragraph (g) below), and the
denominator of which shall be the sum of the number of shares of
Common Stock outstanding on the record date mentioned below and the
number of additional shares offered for subscription or purchase (or
into which the securities so offered are convertible or for which
they are exercisable). Such adjustment shall be made successively
whenever such rights or warrants are issued and shall become
effective immediately after the record
<PAGE>
-11-
date for the determination of shareholders entitled to receive such
rights or warrants; and, to the extent that shares are not delivered
(or securities convertible into or exercisable for shares are not
delivered), after the expiration of such rights or warrants the
Conversion Price shall be readjusted to the Conversion Price which
would then be in effect had the adjustments made upon the issuance
of such rights or warrants been made upon the basis of delivery of
only the number of shares (or securities convertible into or
exercisable for shares) actually delivered.
(c) In case the Company shall distribute to the holders of its Common
Stock evidences of its indebtedness or assets (excluding regular
quarterly cash dividends in the ordinary course and distributions
referred to in paragraph (a) above, but including other cash
dividends or distributions and dividends or distributions of shares
of capital stock other than Common Stock) or subscription rights or
warrants (excluding those referred to in paragraph (b) above), then
in each such case the Conversion Price in effect thereafter shall be
determined by multiplying the Conversion Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the
total number of shares of Common Stock outstanding on the record
date for the distribution multiplied by the current market price per
share of Common Stock (as defined in paragraph (g) below) on the
record date for such distribution, less the fair market value (as
determined in good faith by the Board of Directors of the Company)
of said assets or evidences of indebtedness so distributed or of
such rights or warrants, and the denominator of which shall be the
total number of shares of Common Stock outstanding on the record
date for the distribution multiplied by such current market price
per share of Common Stock on the record date for such distribution.
Such adjustment shall be made successively whenever such a record
date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after
the record date for the determination of shareholders entitled to
receive such distribution.
(d) In case the Company shall issue shares of Common Stock (excluding
shares of Common Stock issued (i) in any of the transactions
described in paragraph (a) above and (ii) upon exercise of stock
options outstanding on May 2, 1995 or granted on the date of
issuance of the Preferred
<PAGE>
-12-
Stock) for no consideration or for a consideration per share of
Common Stock less than the current market price per share (as
defined in paragraph (g) below) on the date the Company fixes the
offering price of such additional shares of Common Stock, the
Conversion Price in effect thereafter shall equal the price
determined by multiplying the Conversion Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the sum
of the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares of Common Stock and
the number of shares which the aggregate consideration received
(determined as provided in paragraph (f) below) for the issuance of
such additional shares of Common Stock would purchase at such
current market price per share, and the denominator of which shall
be the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares of Common Stock. Such
adjustment shall be made successively whenever such an issuance is
made.
(e) In case the Company shall issue any securities convertible into,
exercisable for or exchangeable for shares of Common Stock
(excluding securities issued in transactions described in paragraph
(b) and (c) above) for no consideration or for a consideration per
share of Common Stock initially deliverable upon conversion,
exercise or exchange of such securities (determined as provided in
paragraph (f) below) less than the current market price per share of
Common Stock (as defined in paragraph (g) below) immediately prior
to the issuance of such securities, the Conversion Price shall be
adjusted immediately thereafter so that it shall equal the price
determined by multiplying the Conversion Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the sum
of the number of shares of Common Stock outstanding immediately
prior to the issuance of such securities and the number of shares of
Common Stock which the aggregate consideration received (determined
as provided in paragraph (f) below) for such securities would
purchase at such current market price per share immediately prior
thereto, and the denominator of which shall be the sum of the number
of shares of Common Stock outstanding immediately prior to such
issuance and the maximum number of shares deliverable upon
conversion of, exercise for, or in exchange for such securities at
the initial conversion, exercise or exchange price or rate.
<PAGE>
-13-
Such adjustment shall be made successively whenever such an issuance
is made.
(f) For purposes of any computation respecting consideration received
pursuant to paragraph (d) and (e) above, the following shall apply:
(A) In the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the
Company for any underwriting of the issue or otherwise in
connection therewith;
(B) In the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board
of Directors of the Company (irrespective of the accounting
treatment thereof), whose determination, absent manifest
error, shall be conclusive; and
(C) In the case of the issuance of securities convertible into,
exercisable for or exchangeable for shares of Common Stock,
the aggregate consideration received therefor shall be deemed
to be the consideration received by the Company for the
issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the
conversion, exercise or exchange thereof (the consideration in
each case to be determined in the same manner as provided in
clauses (a) and (b) of this paragraph (f)).
(g) For the purpose of any computation under paragraph (b), (c), (d) and
(e) above, the current market price per share of Common Stock at any
date shall be deemed to be the average of the daily closing prices
for 20 consecutive trading days ending on the trading day
immediately prior to such date. The closing price for each day
shall be the last sale price regular way or, in the case no such
reported sale takes place on such day, the average of the last
reported bid and asked prices regular way, in either case on the
principal national securities exchange or the Nasdaq National Market
on
<PAGE>
-14-
which the Common Stock is listed or admitted for trading, or, if the
Common Stock is not listed or admitted on a national securities
exchange or the Nasdaq National Market, the closing price for each
day shall be the average of the highest reported bid and lowest
reported asked prices on such day as reported by Nasdaq or other
similar organizations if Nasdaq is no longer reporting such
information, or, if such information is not so available, the fair
market price as determined in good faith by the Board of Directors
of the Company.
(h) All calculations under this Section 503 shall be made to the nearest
one-tenth of a cent or to the nearest one-hundredth of a share, as
the case may be.
(i) Whenever the Conversion Price is adjusted, as herein provided, the
Company shall promptly cause a notice setting forth the adjusted
Conversion Price and adjusted number of Shares issuable upon
exercise of each share of the Preferred Stock to be mailed to the
holders thereof, at their last registered addresses appearing in the
Company's transfer records, and shall cause a certified copy thereto
to be mailed to its transfer agent, if any. The Company may retain
a firm of independent certified public accountants selected by the
Board of Directors of the Company (who may be the regular
accountants employed by the Company) to make any computation
required by this Section 503 (other than any computation of the fair
value of property as determined in good faith by the Board of
Directors of the Company), and a certificate signed by such firm
shall be conclusive evidence of the correctness of such adjustment.
(j) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, holders of the Preferred Stock
thereafter shall become entitled to receive any equity securities of
the Company, other than shares of Common Stock, thereafter the
number of such other equity securities so receivable upon conversion
of the Preferred Stock shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the shares of Common Stock contained
in Subsections (a) to (h), inclusive above.
(k) Irrespective of any adjustments in the Conversion Price or the
number of kind of shares purchasable upon conversion of each share
of Preferred Stock, each share
<PAGE>
-15-
of Preferred Stock theretofore or thereafter issued may continue to
express the same number and kind of shares as are stated in the
originally issued shares.
(l) In case of any reclassification, capital reorganization or other
similar activity which results in a change in the outstanding shares
of Common Stock or in case of the merger or consolidation of the
Company with another entity or any sale, assignment, lease or
conveyance to another entity of all or substantially all of the
property or assets of the Company in one or a series of related
transactions, the Company shall, as a condition precedent to such
transaction, cause effective provisions to be made so that the
holders of Preferred Stock shall have the right thereafter, by
converting the Preferred Stock at any time prior to the date of
mandatory redemption of the Preferred Stock, to purchase the kind
and amount of shares and other securities and property receivable
upon such reclassification, capital reorganization or similar
activity, change, merger or consolidation, or sale, assignment,
lease or conveyance which would have been received had the Preferred
Stock been converted immediately prior to such reclassifications,
capital reorganization, similar activity, change, merger or
consolidation, or sale, assignment, lease or conveyance. Any such
provision shall include provision for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided
for herein. The foregoing provisions of this paragraph (l) shall
similarly apply to successive reclassifications, capital
reorganizations and changes of shares and to successive mergers or
consolidations or sales, assignments, leases or conveyances. In the
event that in connection with any such capital reorganization,
reclassification or related change, merger or consolidation or sale,
assignment, lease or conveyance, provision is made for the
substitution or payment, in whole or in part, for the Common Stock
of the Company of a different security of the Company, any such
issuance shall be treated as a reclassification covered by the
provisions of paragraph (a) above.
In case any event shall occur as to which the provisions of
paragraph (a) through (l) hereof are not strictly applicable but the
failure to make any adjustment would not, in the opinion of holders
of the Preferred Stock, fairly protect the conversion rights
represented by the
<PAGE>
-16-
Preferred Stock in accordance with the essential intent and
principles of such Subsections, then, in each such case, at the
request of any holder of Preferred Stock, the Company shall appoint
a firm of independent certified public accountants of recognized
national standing (which may be the regular auditors of the
Company), which shall give their opinion upon the adjustment, if
any, on a basis consistent with the essential intent and principles
established in paragraphs (a) through (l) hereof, necessary to
preserve, without dilution, the conversion rights represented by the
Preferred Stock. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the holders of the Preferred Stock
and shall make the adjustments, if any, described therein.
Section 504. Notice of Certain Corporate Action.
In case:
(i) the Company shall declare a dividend on its Common Stock
payable otherwise than in cash out of its earned surplus; or
(ii) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any other rights; or
(iii) the Company shall reclassify the Common Stock of the Company
(excluding a subdivision or combination of its outstanding shares of
Common Stock); or
(iv) of any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is required, or
of the sale or transfer of all or substantially all of the assets of the
Company; or
(v) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed with each transfer agent (if any) for
the Preferred Stock, and shall cause to be mailed to all holders of record of
the Preferred Stock, at least 20 days (or 10 days in any case specified in
clause (i) or (ii) above) prior to the applicable record date hereinafter
specified, a notice stating (1) the record date, or (2) the date on which such
reclassification, merger, sale, transfer, dissolution, liquidation or winding up
is expected to become effective, and the date as of
<PAGE>
-17-
which it is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, merger, sale, transfer, dissolution, liquidation or
winding up.
Section 505. Company to Reserve Common Stock.
For the purpose of effecting the conversion of the Preferred Stock,
the Company shall at all times reserve and keep available, free from preemptive
rights, out of its authorized but unissued Common Stock, the full number of
shares of Common Stock then issuable upon the conversion of all outstanding
Preferred Stock.
Section 506. Taxes on Conversion.
The Company will pay any and all taxes that may be payable in
respect of the issue or delivery of shares of Common Stock on conversion of the
Preferred Stock pursuant hereto. The Company shall not, however, be required to
pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock in a name other than that of the
holder of the Preferred Stock to be converted, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to the
Company the amount of any such tax, or has established to the satisfaction of
the Company that such tax has been paid.
Section 507. Covenant as to Common Stock.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of the Preferred Stock will upon issue be fully paid and
nonassessable and, except as provided in Section 506, the Company will pay all
taxes, liens and charges with respect to the issue thereof. Each share of
Common Stock which may be issued upon conversion of the Preferred Stock shall
have one vote.
Section 509. Special Provision in Case of Merger,
Consolidation or Other Reorganization or
Sale of Assets.
In case of any merger, consolidation, reorganization, sale or
transfer provided for in Section 503, the Company shall as soon as practicable
thereafter (and in any event at least ten (10) business days before consummation
of such transaction) give notice of such agreement and the material terms
thereof to each holder of
<PAGE>
-18-
Preferred Stock and each such holder of any Preferred Stock may elect, in lieu
of converting his shares in accordance therewith, to require the Company to,
subject to the legal availability of funds therefor, redeem all such shares held
at the liquidation value per share, plus an amount equal to all accrued and
unpaid dividends and all accumulated dividends thereon to the date fixed for
redemption, which shall be not later than the effective date of the merger, sale
or transfer. Redemption of the Preferred Stock shall be a condition to the
effectiveness of such transaction.
ARTICLE VI
Section 601. Voting.
The holders of Preferred Stock shall have, in addition to any voting
rights provided by law, the right to vote by casting 50 (fifty) votes for each
duly authorized, issued and outstanding share of Preferred Stock held by them of
record, as hereafter provided:
(i) voting together with the holders of Common Stock and any other
class of shares voting with Common Stock, on any and all issues presented to a
vote of the holders of Common Stock or as to which the holders of the Common
Stock are entitled to vote upon; and
(ii) as a separate class, upon:
(x) each question or matter in respect of which such holders
are entitled to vote under the Minnesota Business Corporation Act;
(y) any amendment, alteration or repeal of any provision of
the Second Restatement of Articles of Incorporation or this
Certificate of Designation so as to affect adversely the rights,
powers or preferences of the Preferred Stock, and any proposed
creation of a class or series of preferred stock ranking on a
parity with the Preferred Stock as to dividends or on liquidation.
Authorization of any action set forth in (y) above requires the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of Preferred Stock.
<PAGE>
-19-
Section 602. Adjustment in Voting Rights.
The number of votes per share which the holders of Preferred Stock
may cast pursuant to Section 601 shall be adjusted, upon any change in the
Conversion Price under Article V hereof, to equal the number of shares of Common
Stock into which it would be then convertible (whether or not such conversion is
restricted or prohibited for any reason).
IN WITNESS WHEREOF, I have subscribed my name this [ ] day of
[ ] 1995.
________________________________
Judy M. Figge
Attest:
______________________________
STATE OF MINNESOTA)
) ss.
COUNTY OF HENNEPIN)
Kenneth J. Figge, being first duly sworn, on oath deposes and says
that he is the Secretary of In Home Health, Inc.; that the foregoing statement
contains the text of the resolution duly adopted by the Board of Directors of In
Home Health, Inc. as aforesaid; and that he signed this instrument, by authority
of the Directors of In Home Health, Inc., as his free act and deed for the
purposes and uses therein expressed.
________________________________
Subscribed and sworn to before me
this [ ] day of [ ] 1995.
__________________________________
Notary Public
<PAGE>
EXHIBIT C
RESTATED
ARTICLES OF INCORPORATION
OF
AUSTIN MANAGEMENT CORPORATION
I, the undersigned, as Secretary of Austin Management Corporation, a
Minnesota corporation, do hereby certify that by written resolution of the
shareholders and directors dated March 30, 1987, it was unanimously resolved by
the shareholders and directors that the Articles of Incorporation be amended and
restated in accordance with the following resolutions:
RESOLVED, that the Articles of Incorporation of this corporation
be amended and restated in their entirety as follows and that such
amended and restated Articles of Incorporation shall supersede the
original Articles and all Amendments thereto:
ARTICLE I
The name of this corporation shall be In Home Health, Inc.
ARTICLE II
The location and address of this corporation's registered
office in this state shall be 4001 Stinson Boulevard N.E., St.
Anthony, Minnesota 55421, which is in Ramsey County.
ARTICLE III
The total number of shares the corporation has authority to
issue is Five Million (5,000,000) shares of common stock, all of
which shall have the par value of one cent ($0.01) per share.
<PAGE>
ARTICLE IV
Shareholders shall have no rights of cumulative voting.
ARTICLE V
Shareholders shall have no rights, preemptive or otherwise,
to acquire any part of any unissued shares or other securities of
this corporation or of any rights to purchase shares or other
securities of this corporation before the corporation may offer
them to other persons.
ARTICLE VI
The Board of Directors of this corporation shall consist
of three directors of such other number of directors as shall be
fixed in the manner provided in the By-Laws of this corporation.
ARTICLE VII
Any action required or permitted to be taken at a meeting of
the Board of Directors may be taken by written action signed by
all of the directors then in office, unless the action is one which
need not be approved by the shareholders, in which case such action
shall be effective if signed by the number of directors that would be
required to take the same action at a meeting at which all directors
were present.
ARTICLE VIII
No director of the Corporation shall be personally liable to
the Corporation or its shareholders for monetary damages for breach
of fiduciary duty by such director as a director; provided, however,
that this Article VIII shall not eliminate or limit the liability of
a director to the extent provided by applicable law (i) for any breach
of the director's duty of loyalty to the Corporation or its shareholders,
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) under Sections 302A.559
or 80A.23 of the Minnesota Statutes, (iv) for any transaction from
which the director derived an
-2-
<PAGE>
improper personal benefit, or (v) for any act or omission occurring
prior to the date when this Article VIII becomes effective. If the
Minnesota Business Corporation Act is amended after approval by the
shareholders of this Article to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the Minnesota Business
Corporation Act, as so amended. No amendment to or repeal of this
Article VIII shall apply to, or have any effect on, the liability or
alleged liability of any director of the Corporation for or with
respect to any acts or omissions of such director occurring prior
to such amendment or repeal.
FURTHER RESOLVED, that Kenneth J. Figge, the Secretary of this
corporation be, and hereby is, authorized and directed to make,
execute and acknowledge Articles of Amendment embracing the
foregoing resolution and to cause such Articles of Amendment to be
filed and recorded in the manner required by law.
IN WITNESS WHEREOF, I have hereunto subscribed my name pursuant to and
authorized by the foregoing resolution this 30th day of March, 1987.
/s/ Kenneth J. Figge
-----------------------------------
Kenneth J. Figge, Secretary of
Austin Management Corporation
STATE OF MINNESOTA )
) ss
COUNTY OF __________)
The foregoing instrument was acknowledged before me this 30th day of
March, 1987, by Kenneth J. Figge, the Secretary of Austin Management
Corporation, a Minnesota Corporation, on behalf of the corporation.
[stamp] /s/
------------------------------------
Notary Public
My commission expires:
-3-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
IN HOME HEALTH, INC.
We, the undersigned, Judith M. Figge, as President, and Kenneth J. Figge,
as Secretary of In Home Health, Inc. a corporation organized and existing under
the laws of the State of Minnesota, do hereby certify that, at a Special Meeting
of Stockholders held on February 17, 1988, resolutions were duly adopted by the
affirmative vote of a majority of the holders of the outstanding shares of
common stock of the Company entitled to vote, amending Article III to the
Articles of Incorporation of the Company as follows:
"Article III
The total number of shares the corporation
has authority to issue is Twenty Million
(20,000,000) shares of common stock, all of
which shall have the par value of one cent
($0.01) per share."
IN WITNESS WHEREOF, we have hereunto subscribed our names as officers of
the Company pursuant to the foregoing resolution this 18th day of February,
1988.
IN HOME HEALTH, INC.
By /s/ Judith M. Figge
-------------------------------
Judith M. Figge
President
/s/ Kenneth J. Figge
--------------------------------
Kenneth J. Figge
Secretary
<PAGE>
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
On this 18th day of February, 1988, before me, a Notary Public, within and
for said County, personally appeared Judith M. Figge and Kenneth J. Figge to me
known to be the persons who executed the foregoing Certificate of Amendment,
who, being by me duly sworn, did say, the said Judith M. Figge that she is the
President of In Home Health, Inc., and the said Kenneth J. Figge that he is the
Secretary of In Home Health, Inc., the Company named in the foregoing
Certificate, and that the facts stated in said Certificate are true; and said
Judith M. Figge and Kenneth J. Figge declare that they executed said Certificate
as the President and Secretary, respectively, of said Company by authority of
the stockholders of the Company, and said Judith M. Figge and Kenneth J. Figge
acknowledged that they executed the foregoing Certificate as the free act and
deed of said corporation.
/s/ illegible
-----------------------------
Notary Public
[Stamp]
-2-
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF IN HOME HEALTH, INC.
Pursuant to the provisions of Minn. Stat. 302A.135, the undersigned
corporation adopts the following Articles of Amendment to its Articles of
Incorporation:
1. Article III of the corporation's Articles of Incorporation is amended
to read as follows:
"The authorized capital stock of this corporation shall consist of Twenty
Million (20,000,000) shares of Common Stock, par value $.01 per share, and
One Million (1,000,000) shares of Preferred Stock. The Preferred Stock may
be issued from time to time as shares of one or more series. Subject to the
provisions hereof and the limitations prescribed by law, the Board of
Directors is authorized, by adopting resolutions providing for the issuance
of Preferred Stock of any particular series, to establish the number of
shares of Preferred Stock to be included in each such series, and to fix
the par value, designation, relative powers, preferences, rights,
qualifications, limitations and restrictions thereof, including without
limitation the right to create voting, dividend and liquidation preferences
greater than those of Common Stock."
2. The foregoing amendment was ratified and approved at a meeting of
stockholders held on February 26, 1991.
IN HOME HEALTH, INC.
By /s/ Judy M. Figge, President
------------------------------------
Judy M. Figge, President
By /s/ Kenneth J. Figge, Secretary
------------------------------------
Kenneth J. Figge, Secretary
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ___ day of March, 1991,
by Judy M. Figge and Kenneth J. Figge, respectively the President and Secretary
of In Home Health, Inc., a Minnesota corporation, on behalf of the corporation.
[Stamp] /s/ illegible
---------------------------------------
Notary Public
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF IN HOME HEALTH, INC.
Pursuant to the provisions of Minn. Stat. 302A.135, the undersigned
corporation adopts the following Articles of Amendment to its Articles of
Incorporation:
1. Article III of the corporation's Articles of Incorporation is amended
to read as follows:
"The authorized capital stock of this corporation shall consist of Forty
Million (40,000,000) shares of Common Stock, par value $.01 per share, and
One Million (1,000,000) shares of Preferred Stock. The Preferred Stock may
be issued from time to time as shares of one or more series. Subject to
the provisions hereof and the limitations prescribed by law, the Board of
Directors is authorized, by adopting resolutions providing for the issuance
of Preferred Stock of any particular series, to establish the number of
shares of Preferred Stock to be included in each such series, and to fix
the par value, designation, relative powers, preferences, rights,
qualifications, limitations and restrictions thereof, including without
limitation the right to create voting, dividend and liquidation preferences
greater than those of Common Stock."
2. The foregoing amendment was ratified and approved at a meeting of
stockholders held on February 18, 1992.
IN HOME HEALTH, INC.
By /s/ Judy M. Figge
---------------------------------
Judy M. Figge, President
By /s/ Kenneth J. Figge
---------------------------------
Kenneth J. Figge, Secretary
STATE OF MINNESOTA)
) ss.
COUNTY OF HENNEPIN)
The foregoing instrument was acknowledged before me this 21st day of
February, 1992, by Judy M. Figge and Kenneth J. Figge, respectively the
President and Secretary of In Home Health, Inc., a Minnesota corporation, on
behalf of the corporation.
[Stamp] /s/ illegible
---------------------------------------
Notary Public
<PAGE>
EXHIBIT D
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of May 2, 1995 by and between IN HOME
HEALTH, INC., a Minnesota corporation (the "COMPANY"), and JUDY M. FIGGE (the
"EXECUTIVE").
R E C I T A L S :
A. The Executive has been employed as a principal executive of
the Company and has made a unique contribution to the business of the Company.
B. The Board of Directors of the Company believes that the
continued services of Executive would be of great value to the Company and is
desirous of retaining her services as contemplated hereby.
C. The Executive desires to accept employment by the Company and
to render services to the Company, on the terms and subject to the conditions
provided in this Agreement.
A G R E E M E N T :
The parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ and retain
the Executive, and the Executive agrees to be employed and retained by the
Company, to render services to the Company for the period, at the rate of
compensation and upon the other terms and conditions set forth herein. The
Executive shall devote her best efforts and her entire working time and
attention to her employment by the Company.
2. TERM. The term of the Executive's employment under this
Agreement (the "EMPLOYMENT TERM") shall commence on the date of consummation
(the "COMMENCEMENT DATE") of the purchase by Manor Healthcare Corp., a
Delaware corporation (the "PURCHASER"), of securities of the Company pursuant
to the terms and subject to the conditions of the Securities Purchase and Sale
Agreement dated as of May 2, 1995 by and between the Company and the Purchaser
(the "SECURITIES PURCHASE AND SALE AGREEMENT") and shall continue until
September 30, 1997 (such date being referred to herein as the "EXPIRATION
DATE"), unless earlier terminated as provided herein.
<PAGE>
-2-
The Company agrees that it will discuss an extension of the Employment Term
beyond the Expiration Date at least six months prior to the Expiration Date;
PROVIDED, HOWEVER, that the Company shall have no obligation hereunder to so
extend the Employment Term. In the event the Securities Purchase and Sale
Agreement is not consummated or is terminated in accordance with its terms, this
Agreement shall be null and void.
3. POSITION AND DUTIES.
(a) POSITION. The Executive shall serve the Company as
president and chairperson of the board of directors. During her executive
employment hereunder, the Executive shall report to the chief executive officer
of the Company. During the Employment Term, the Company shall include the
Executive in any slate of nominees proposed by the Company for election to the
Company's Board of Directors. Upon termination of the Executive's employment
under this Agreement or the expiration of this Agreement, the Executive shall
immediately submit her resignation from the Board of Directors.
(b) DUTIES. During the Employment Term, the Executive shall
serve the Company and its subsidiaries, if any, in such senior executive
capacity with such duties consistent therewith and shall perform such other
services for the Company and its subsidiaries, if any, consistent with the
position of a senior executive officer as may be assigned to her from time to
time by the Company.
4. COMPENSATION AND REIMBURSEMENT OF EXPENSES.
(a) SALARY. For services rendered by the Executive under this
Agreement, the Company shall pay to the Executive as compensation during the
Employment Term a salary (the "SALARY") as follows: (i) $300,000 per annum
until September 30, 1996 and (ii) $315,000 per annum from October 1, 1996 to the
Expiration Date. The Salary shall be payable at least in monthly installments
on the normal payroll cycle of the Company, commencing with the end of the pay
period which next follows the commencement of the Employment Term. The
Executive will also be eligible to receive annual bonuses in accordance with the
management incentive compensation plan of the Company as described in Schedule
5.8(a) annexed to the Securities Purchase and Sale Agreement.
(b) REIMBURSEMENT OF EXPENSES. Consistent with established
policies of the Company as in effect from time to time, the Company shall pay or
reimburse the Executive for all reasonable travel, hotel, entertainment and
other expenses incurred by the
<PAGE>
-3-
Executive in performing her obligations under this Agreement, including a
monthly automobile allowance covering the Executive's automobile lease payment
obligations in respect of the leased 1994 Mercedes-Benz 500 SL in effect on the
date of this Agreement (which lease will be assigned to the Executive as soon as
practicable after the Commencement Date) and related fuel, maintenance and
insurance expenses, a cellular phone and related telephone charges (to the
extent incurred for business purposes), the use of a personal computer and
facsimile machine for the Executive's home, and life insurance premiums not to
exceed $30,000 per annum on life insurance policies owned by the Executive.
5. BENEFITS.
(a) BENEFIT PLANS. The Executive shall also be entitled to
participate, on a basis comparable to other key executives of the Company, in
any benefit plan or program of the Company for which key executives are or shall
become eligible, including, without limitation, pension, 401(k), life and
disability insurance and stock benefits and/or plans, subject, in the case of
tax-qualified benefit plans and programs, to restrictions under applicable law.
The Executive shall be entitled, at her own expense, to continue her
participation in any group insurance plans after the termination of her
employment with the Company, to the extent required or permitted under
applicable law.
(b) PERSONAL TIME. The Executive shall be entitled to personal
time (inclusive of vacation time and sick leave) with compensation during the
period commencing with the Commencement Date and ending on September 30, 1996
with the number of days of personal time prorated on the basis of 21 days per
one-year period and, during the period commencing on October 1, 1996 and ending
on the Expiration Date, 27 days of personal time. The Executive shall also be
entitled to all paid holidays given by the Company to its senior executive
officers.
(c) NO REDUCTION. There shall be no material reduction or
diminution of the benefits provided in this Section 5 (i) unless the Executive
shall have given her prior written consent to such reduction or diminution and
an equitable arrangement (embodied in an ongoing substitute or alternative
benefit or plan) has been made with respect to such benefit or plan or (ii)
except, in the case of Section 5(a), for across-the-board benefit reductions
similarly affecting all senior management personnel of the Company.
(d) OPTIONS. In addition to any stock options otherwise
available to an employee under a stock option plan, upon the
<PAGE>
-4-
execution of this Agreement, the Executive shall be granted options (the
"OPTIONS") to purchase 300,000 shares of Common Stock under an amendment to
the Company's 1995 Stock Option Plan approved by the Company's stockholders (as
so amended, the "1995 PLAN") which options (i) will have an exercise price
equal to the fair market value of the Common Stock on the date of grant, (ii)
will be immediately vested upon the grant thereof, (iii) will not be exercisable
until after January 1, 1997, (iv) will have a term of ten years from the date of
grant and will expire on the tenth anniversary of the date of grant; PROVIDED,
HOWEVER, that anything herein to the contrary notwithstanding the Options
shall expire, subject to the provisions of the next sentence, on the later of
(x) March 31, 1997 and (y) the date that is 90 days after the termination of the
Executive's employment on the terms and as provided in the 1995 Plan, and (v)
will be subject to forfeiture in their entirety as set forth in the next
sentence. In the event that, on or prior to December 31, 1996, the Board of
Directors of Manor Healthcare Corp. or of the Company shall have (i) formed in
good faith a belief that the Executive had actual conscious knowledge that a
representation or warranty included in the Securities Purchase and Sale
Agreement or any schedule, exhibit or appendix thereto was materially untrue at
the time of the Closing (as defined in the Securities Purchase and Sale
Agreement) and (ii) commenced an action in a court of competent jurisdiction
with respect to such believed material misrepresentation, the Company and the
Executive agree to be bound by the decision of such court with the effect that
if the court determines that Manor Healthcare Corp.'s or the Company's belief
was correct (a "FORFEITURE EVENT"), the options shall become null and void and
shall be forfeited in their entirety by the Executive to the Company, and if the
court determines that Manor Healthcare Corp.'s or the Company's belief was
incorrect, then the options will be exercisable until the date that is the later
of 90 days after (x) the termination of the Executive's employment or (y) the
date of the court's decision.
6. BENEFITS PAYABLE UPON DISABILITY.
(a) DISABILITY BENEFITS. Subject to Section 7(b) hereof, during
any period of Disability (as hereinafter defined) occurring during the
Employment Term, the Company shall continue to pay to the Executive the
compensation provided in Section 4 hereof and extend to her the benefits
provided in Sections 4 and 5 hereof; it being understood that if disability
benefits are provided under any disability policy maintained by the Company,
payments under such policy shall be credited against such obligations of the
Company. As used in this Agreement, the term "DISABILITY" shall mean the
material inability of the Executive to render her
<PAGE>
-5-
agreed-upon services to the Company due to physical and/or mental infirmity.
(b) SERVICES DURING DISABILITY. During the Employment Term,
notwithstanding any Disability, the Executive shall, to the extent that she is
physically and mentally able to do so, furnish information and assistance to the
Company, and, upon the reasonable request in writing of the Company, from time
to time, she shall make herself available to the Company to undertake reasonable
assignments consistent with her current position with the Company and her
physical and mental health.
7. EARLY TERMINATION. This Agreement is subject to termination
prior to the Expiration Date, as follows:
(a) DEATH OF THE EXECUTIVE. If the Executive dies, this
Agreement shall terminate effective as of the date of the Executive's
death, and thereupon the Executive's estate shall be entitled solely to
the payments and benefits set forth in Section 8(b) hereof.
(b) DISABILITY. If the Executive has been unable to perform her
obligations hereunder for six consecutive months, or for at least 180 days
during any calendar year, due to Disability, the Company shall thereafter
have the right to terminate the Executive's employment hereunder upon at
least 30 days' prior written notice to the Executive of the effective date
of such termination, and thereupon the Executive shall be entitled solely
to the payments and benefits set forth in Section 8(b) hereof.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company shall
have the right to terminate the Executive's employment hereunder for Cause
(as hereafter defined), and thereupon the Executive shall be entitled
solely to the payments and benefits set forth in Section 8(a) hereof. For
purposes of this Agreement, the term "CAUSE" shall mean any of the
following: (i) conviction of the Executive by a court of competent
jurisdiction for commission of any felony, (ii) the Executive's failure or
refusal to perform substantially her duties with the Company which failure
or refusal continues for thirty days following the Executive's receipt of
written notice specifying the nature and manner of such failure or refusal
to perform, (iii) the Executive's willful misconduct or gross negligence
which is injurious to the Company or its reputation and goodwill, (iv) a
Forfeiture Event, or (v) the Executive's breach of Section 9, 10, 11, 12
or 13 of this Agreement.
<PAGE>
-6-
(d) RESIGNATION OR RETIREMENT. If the Executive resigns or
retires, this Agreement shall terminate as of the date of the Executive's
resignation or retirement, and thereupon the Executive shall be entitled
solely to the payments and benefits set forth in Section 8(b), except
that, if the Executive's resignation or retirement is for any reason other
than Good Reason (as hereinafter defined), then, as of the date of the
Executive's resignation or retirement, the Executive shall be entitled
instead solely to the payments and benefits set forth in Section 8(a).
"GOOD REASON" shall mean any of the following: (i) a request that the
Executive permanently relocate to a location not in the Minneapolis,
Minnesota metropolitan area that the Executive rejects within 30 days of
the request and, upon such rejection, the relocation request not being
rescinded or (ii) a failure or refusal by the Company to provide duties
for the Executive to perform which are consistent with the position of a
senior executive officer of the Company which failure or refusal continues
for thirty days following the Company's receipt of written notice
specifying the nature and manner of such failure or refusal to perform.
8. EFFECT OF EARLY TERMINATION.
(a) CAUSE OR RESIGNATION OR RETIREMENT FOR OTHER THAN GOOD
REASON. Upon the early termination of this Agreement by the Company for Cause
or upon the resignation or retirement of the Executive for other than Good
Reason, the Company shall pay to the Executive (i) her Salary accrued through
the effective date of termination, payable at the time such payment is otherwise
due and payable hereunder, and (ii) all other amounts and benefits to which the
Executive is entitled, including, without limitation, vacation pay and expense
reimbursement amounts accrued to the effective date of termination and amounts
and benefits owing under the terms of any benefit plan of the Company in which
the Executive participates, and the Company and the Executive shall have no
further obligation to each other under this Agreement except as provided in
Section 16.
(b) OTHER TERMINATION. Upon the early termination of this
Agreement pursuant to Section 7(a), 7(b) or 7(d) (in the case of the resignation
or retirement of the Executive for Good Reason), the Company shall pay to the
Executive an amount equal to the remaining Salary which otherwise would have
been payable to the Executive until the Expiration Date (the "SEVERANCE
AMOUNT") plus all other amounts and benefits to which the Executive is entitled
accrued to the effective date of termination, including, without limitation,
expense reimbursement amounts and amounts and benefits
<PAGE>
-7-
owing under the terms of any benefit plan of the Company in which the Executive
participates. The Severance Amount shall be paid in a lump sum equal to the net
present value of the Severance Amount, determined by discounting the aggregate
Severance Amount using a discount rate equal to the yield on the date of such
termination of United States Treasury Securities having a maturity closest to
one year from such date.
9. NON-SOLICITATION AGREEMENT. The Executive covenants and
agrees that while employed by the Company and for a period of one year
immediately following the effective date of any employment termination, the
Executive will not in any way, directly or indirectly, on the Executive's own
behalf or on behalf of or in conjunction with any other person, partnership,
firm or corporation, solicit, divert, take away, or attempt to take away any
person, partnership, firm or corporation (or the business or patronage) that has
been a customer of the Company or any of its affiliated entities. The Executive
further agrees that, for such period, the Executive will not in any way,
directly or indirectly, on the Executive's own behalf or on behalf of or in
conjunction with any person, partnership, firm or corporation, solicit, entice,
hire, employ or endeavor to employ any employee of the Company or any of its
affiliated entities.
10. AGREEMENT NOT TO COMPETE. The Executive covenants and
agrees that she will not, during the term of her employment with the Company,
and so long as the Executive has been paid any payments due under Sections 4 and
8 above, for a period of one year following termination of such employment,
either directly or indirectly, as an employee, director, officer, shareholder,
partner, advisor, consultant or otherwise, engage in any commercial activity or
participate in any venture of any kind that competes with the Company with
respect to the delivery of home health care products and services within any
area which constitutes a Restricted Geographic Area at the date of such
termination. "RESTRICTED GEOGRAPHIC AREA" at any date means the areas which
are within a fifty-mile radius of any city, town or other population center in
which, at such date, the Company operates a professional home health care
facility.
Nothing stated in this Section 10 shall be deemed to preclude the
Executive from holding less than 5% of the outstanding capital stock of any
corporation required to file periodic reports with the Securities and Exchange
Commission under Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, and the securities of which are listed on any securities exchange or
quoted on the Nasdaq National Market or traded on the over-the-counter market.
<PAGE>
-8-
The Executive acknowledges that the Company has expended substantial
time and expense in the research and development of processes, technology,
techniques and products which are unique to the Company or not generally known
to others and which could be unfairly taken or used by others in competition
with the Company. Accordingly, the Executive agrees that the restrictions
contained in this Agreement are reasonable.
If the scope of the restrictions contained in this Section 10 is too
broad to permit enforcement of such restrictions to their full extent, then such
restrictions shall be construed or re-written (blue-lined) so as to be
enforceable to the maximum extent permitted by law, and the Executive hereby
consents, to the extent she may lawfully do so, to the judicial modification of
the scope of such restrictions in any proceeding brought to enforce such
restrictions. In the event of any breach by the Executive of this Section 10,
the Company may elect to institute and prosecute proceedings in any state or
federal court located in the State of Minnesota, either at law or in equity, to
seek to obtain specific performance of any part of this Agreement, to seek
injunctive relief against the Executive to temporarily or permanently enjoin the
violation of this Section 10 and/or to seek to recover any damages resulting
from the breach of this Section 10, and to recover attorneys' fees and costs in
connection with the institution and prosecution of such proceedings. In any
such proceedings, the Executive shall be entitled to seek to recover her
attorneys' fees and costs in connection with such proceedings. No remedy
available to the Company for a breach of this Section 10 is intended to be
exclusive of any other remedy and all remedies are cumulative. The Executive
agrees that damages are not adequate to compensate the Company for any breach by
the Executive of this Agreement and hereby waives the defense of an adequate
remedy at law or any other remedy at law and admits and concedes that there are
none.
11. CONFIDENTIAL INFORMATION. The Executive covenants and
agrees not to at any time use, divulge, furnish or make accessible to anyone
other than the Company, its affiliated entities, or its or their directors and
officers, any proprietary or confidential information ("CONFIDENTIAL
INFORMATION") of the Company or any of its affiliated entitles, including but
not limited to information regarding the development of the Company's products,
or the provision of the Company's services, or the Company's customer lists.
Upon termination of her employment with the Company, the Executive
agrees to deliver to the Company all written materials that constitute
Confidential Information. Further, upon
<PAGE>
-9-
termination of her employment with the Company, the Executive agrees to make
available to any person designated by the Company all information concerning
pending or preceding transactions which may affect the operation of the Company
or any subsidiary of the Company about which the Executive has knowledge. The
obligations of the Executive contained in this paragraph are in addition to the
obligation of the Executive to return to the Company, upon the termination of
her employment, all property of the Company then in her possession.
12. ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS. The Executive
shall promptly disclose to the Company all inventions, discoveries,
improvements, designs, processes, techniques, equipment, trademarks or
copyrightable matter conceived or made by the Executive during the Executive's
employment and related to any aspect of the business of the Company, and the
Executive hereby assigns all of the Executive's interest therein, including the
goodwill of the business symbolized by any trademarks, to the Company. The
Executive further agrees to execute any applications, assignments or other
instruments which the Company shall deem necessary to obtain letters patent,
trademark registration or copyright registration of the United States or any
foreign country or to otherwise protect the Company's interest therein. Nothing
contained in this provision shall apply to any invention for which no equipment,
supplies, facility or trade secrets information of the Company or any affiliated
entity of the Company was used and which was developed entirely on the
Executive's own time, and (a) which does not relate (1) to any aspect of the
business of the Company or any affiliated entity of the Company or (2) to the
actual or demonstrably anticipated research or development of the Company or any
affiliated entity of the Company, or (b) which does not result from any work
performed by the Executive for the Company or any affiliated entity of the
Company.
13. ASSISTANCE IN LITIGATION. During the Employment Term, the
Executive shall, upon reasonable notice, furnish such information and proper
assistance to the Company as may reasonably be required by the Company in
connection with any litigation in which it is, or may become, a party.
14. FEDERAL INCOME TAX WITHHOLDING. The Company shall withhold
from any benefits payable pursuant to this Agreement such Federal, State, City
or other taxes as may be required to be withheld pursuant to any law or
governmental regulations or ruling.
15. EFFECT OF PRIOR AGREEMENTS. This Agreement contains the
entire understanding between the parties hereto respecting the Executive's
employment by the Company and supersedes any prior
<PAGE>
-10-
employment agreement or arrangement between the Company and the Executive.
16. INDEMNIFICATION. The Company shall indemnify and hold the
Executive harmless to the fullest extent legally permissible under the Minnesota
Business Corporation Act, as amended from time to time, against any and all
expenses, liabilities and losses (including attorneys' fees, judgments, fines
and amounts paid in settlement) reasonably incurred or suffered by her in
connection with service as an officer of the Company or any other service or
function served by her on behalf of the Company or at the Company's request;
provided, that, the Executive shall not be entitled to indemnification hereunder
if the expenses, liabilities and losses referred to above resulted from or
relate to willful misconduct or gross negligence by the Executive or any
material misrepresentation by the Company in the Securities Purchase and Sale
Agreement of which the Executive had actual knowledge. The Company shall
advance to the Executive the amount of her expenses incurred in connection with
any proceeding relating to any such service or function to the fullest extent
legally permissible under the Minnesota Business Corporation Act. The
indemnification and expense reimbursement obligations of the Company in this
Section 16 will continue as to the Executive after she ceases to be an officer
of the Company and shall inure to the benefit of her heirs, executors and
administrators. The Company shall not, without the Executive's written consent,
cause or permit any amendment to the Company's governing documents which would
affect the Executive's rights to indemnification and expense reimbursement
thereunder.
17. GENERAL PROVISIONS.
(a) NONASSIGNABILITY. Neither this Agreement nor any right or
interest hereunder shall be assignable by the Executive, her beneficiaries, or
legal representatives without the Company's prior written consent.
(b) BINDING AGREEMENT. This Agreement shall be binding upon,
and inure to the benefit of, the Executive and the Company and their respective
heirs, executors, administrators, successors and permitted assigns.
(c) AMENDMENT OF AGREEMENT. This Agreement may not be modified
or amended except by an instrument in writing signed by the parties hereto.
(d) WAIVER. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any
<PAGE>
-11-
estoppel against the enforcement of any provision of this Agreement, except by
written instrument of the party charged with such waiver or estoppel.
(e) SEVERABILITY. If, for any reason, any provision of this
Agreement is held invalid, such invalidity shall not affect any other provision
of this Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect.
(f) NOTICES. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified or registered mail, return receipt requested, postage prepaid,
if to the Executive, addressed to Judy M. Figge, 2004 Sugar Woods Drive, Orono,
Minnesota 55356; if to the Company, addressed to In Home Health, Inc., Carlson
Center, Suite 500, 601 Lakeshore Parkway, Minnetonka, MN 55305-5214 and
directed to the attention of the chief executive officer of the Company with a
copy to the secretary of the Company; or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
(g) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(h) INDULGENCES, ETC. Neither the failure nor any delay on the
part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence.
(i) HEADINGS. The headings of paragraphs herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
(j) GOVERNING LAW. This Agreement is governed by the laws of
the State of Minnesota, and its validity, interpretation, performance, and
enforcement shall be governed by the laws of said State.
<PAGE>
-12-
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has signed this
Agreement, all as of the day and year first above written.
IN HOME HEALTH, INC.
By:
-------------------------------------
Name:
Title:
---------------------------------
Judy M. Figge
<PAGE>
EXHIBIT E
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of May 2, 1995 by and between IN HOME
HEALTH, INC., a Minnesota corporation (the "COMPANY"), and KENNETH J. FIGGE
(the "EXECUTIVE").
R E C I T A L S :
A. The Executive has been employed as a principal executive of
the Company and has made a unique contribution to the business of the Company.
B. The Board of Directors of the Company believes that the
continued services of Executive would be of great value to the Company and is
desirous of retaining his services as contemplated hereby.
C. The Executive desires to accept employment by the Company and
to render services to the Company, on the terms and subject to the conditions
provided in this Agreement.
A G R E E M E N T :
The parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ and retain
the Executive, and the Executive agrees to be employed and retained by the
Company, to render services to the Company for the period, at the rate of
compensation and upon the other terms and conditions set forth herein. The
Executive shall devote his best efforts and his entire working time and
attention to his employment by the Company.
2. TERM. The term of the Executive's employment under this
Agreement (the "EMPLOYMENT TERM") shall commence on the date of consummation
(the "COMMENCEMENT DATE") of the purchase by Manor Healthcare Corp., a
Delaware corporation (the "PURCHASER"), of securities of the Company pursuant
to the terms and subject to the conditions of the Securities Purchase and Sale
Agreement dated as of May 2, 1995 by and between the Company and the Purchaser
(the "SECURITIES PURCHASE AND SALE AGREEMENT") and shall continue until
September 30, 1997 (such date being referred to herein as the "EXPIRATION
DATE"), unless earlier terminated as provided herein.
<PAGE>
-2-
The Company agrees that it will discuss an extension of the Employment Term
beyond the Expiration Date at least six months prior to the Expiration Date;
PROVIDED, HOWEVER, that the Company shall have no obligation hereunder to so
extend the Employment Term. In the event the Securities Purchase and Sale
Agreement is not consummated or is terminated in accordance with its terms, this
Agreement shall be null and void.
3. POSITION AND DUTIES.
(a) POSITION. The Executive shall serve the Company as the
chief financial officer. During the Employment Term, the Company shall include
the Executive in any slate of nominees proposed by the Company for election to
the Company's Board of Directors. Upon termination of the Executive's
employment under this Agreement or the expiration of this Agreement, the
Executive shall immediately submit his resignation from the Board of Directors.
(b) DUTIES. During the Employment Term, the Executive shall
serve the Company and its subsidiaries, if any, in such senior executive
capacity with such duties consistent therewith and shall perform such other
services for the Company and its subsidiaries, if any, consistent with the
position of a senior executive officer as may be assigned to him from time to
time by the Company.
4. COMPENSATION AND REIMBURSEMENT OF EXPENSES.
(a) SALARY. For services rendered by the Executive under this
Agreement, the Company shall pay to the Executive as compensation during the
Employment Term a salary (the "SALARY") as follows: (i) $226,000 per annum
until September 30, 1996 and (ii) $237,000 per annum from October 1, 1996 to the
Expiration Date. The Salary shall be payable at least in monthly installments
on the normal payroll cycle of the Company, commencing with the end of the pay
period which next follows the commencement of the Employment Term. The
Executive will also be eligible to receive annual bonuses in accordance with the
management incentive compensation plan of the Company as described in Schedule
5.8(a) annexed to the Securities Purchase and Sale Agreement.
(b) REIMBURSEMENT OF EXPENSES. Consistent with established
policies of the Company as in effect from time to time, the Company shall pay or
reimburse the Executive for all reasonable travel, hotel, entertainment and
other expenses incurred by the Executive in performing his obligations under
this Agreement, including a monthly automobile allowance covering the
Executive's
<PAGE>
-3-
automobile lease payment obligations in respect of the leased 1994 Lexus GS 300
in effect on the date of this Agreement (which lease will be assigned to the
Executive as soon as practicable after the Commencement Date) and related fuel,
maintenance and insurance expenses, a cellular phone and related telephone
charges (to the extent incurred for business purposes) and life insurance
premiums not to exceed $48,000 per annum on life insurance policies owned by the
Executive.
5. BENEFITS.
(a) BENEFIT PLANS. The Executive shall also be entitled to
participate, on a basis comparable to other key executives of the Company, in
any benefit plan or program of the Company for which key executives are or shall
become eligible, including, without limitation, pension, 401(k), life and
disability insurance and stock benefits and/or plans, subject, in the case of
tax-qualified benefit plans and programs, to restrictions under applicable law.
The Executive shall be entitled, at his own expense, to continue his
participation in any group insurance plans after the termination of his
employment with the Company, to the extent required or permitted under
applicable law.
(b) PERSONAL TIME. The Executive shall be entitled to personal
time (inclusive of vacation time and sick leave) with compensation during the
period commencing with the Commencement Date and ending on September 30, 1996
with the number of days of personal time prorated on the basis of 21 days per
one-year period and, during the period commencing on October 1, 1996 and ending
on the Expiration Date, 21 days of personal time. The Executive shall also be
entitled to all paid holidays given by the Company to its senior executive
officers.
(c) NO REDUCTION. There shall be no material reduction or
diminution of the benefits provided in this Section 5 (i) unless the Executive
shall have given his prior written consent to such reduction or diminution and
an equitable arrangement (embodied in an ongoing substitute or alternative
benefit or plan) has been made with respect to such benefit or plan or (ii)
except, in the case of Section 5(a), for across-the-board benefit reductions
similarly affecting all senior management personnel of the Company.
(d) OPTIONS. In addition to any stock options otherwise
available to an employee under a stock option plan, upon the execution of this
Agreement, the Executive shall be granted options (the "OPTIONS") to purchase
200,000 shares of Common Stock under an amendment to the Company's 1995 Stock
Option Plan approved by the Company's stockholders (as so amended, the "1995
PLAN") which
<PAGE>
-4-
options (i) will have an exercise price equal to the fair market value of the
Common Stock on the date of grant, (ii) will be immediately vested upon the
grant thereof, (iii) will not be exercisable until after January 1, 1997, (iv)
will have a term of ten years from the date of grant and will expire on the
tenth anniversary of the date of grant; PROVIDED, HOWEVER, that anything
herein to the contrary notwithstanding the Options shall expire, subject to the
provisions of the next sentence, on the later of (x) March 31, 1997 and (y) the
date that is 90 days after the termination of Executive's employment on the
terms and as provided in the 1995 Plan, and (v) will be subject to forfeiture in
their entirety as set forth in the next sentence. In the event that, on or
prior to December 31, 1996, the Board of Directors of Manor Healthcare Corp. or
of the Company shall have (i) formed in good faith a belief that the Executive
had actual conscious knowledge that a representation or warranty included in the
Securities Purchase and Sale Agreement or any schedule, exhibit or appendix
thereto was materially untrue at the time of the Closing (as defined in the
Securities Purchase and Sale Agreement) and (ii) commenced an action in a court
of competent jurisdiction with respect to such believed material
misrepresentation, the Company and the Executive agree to be bound by the
decision of such court with the effect that if the court determines that Manor
Healthcare Corp.'s or the Company's belief was correct (a "FORFEITURE EVENT"),
the options shall become null and void and shall be forfeited in their entirety
by the Executive to the Company, and if the court determines that Manor
Healthcare Corp.'s or the Company's belief was incorrect, then the options will
be exercisable until the date that is the later of 90 days after (x) the
termination of the Executive's employment or (y) the date of the court's
decision.
6. BENEFITS PAYABLE UPON DISABILITY.
(a) DISABILITY BENEFITS. Subject to Section 7(b) hereof, during
any period of Disability (as hereinafter defined) occurring during the
Employment Term, the Company shall continue to pay to the Executive the
compensation provided in Section 4 hereof and extend to him the benefits
provided in Sections 4 and 5 hereof; it being understood that if disability
benefits are provided under any disability policy maintained by the Company,
payments under such policy shall be credited against such obligations of the
Company. As used in this Agreement, the term "DISABILITY" shall mean the
material inability of the Executive to render his agreed-upon services to the
Company due to physical and/or mental infirmity.
(b) SERVICES DURING DISABILITY. During the Employment Term,
notwithstanding any Disability, the Executive shall, to the
<PAGE>
-5-
extent that he is physically and mentally able to do so, furnish information
and assistance to the Company, and, upon the reasonable request in writing of
the Company, from time to time, he shall make himself available to the Company
to undertake reasonable assignments consistent with his current position with
the Company and his physical and mental health.
7. EARLY TERMINATION. This Agreement is subject to termination
prior to the Expiration Date, as follows:
(a) DEATH OF THE EXECUTIVE. If the Executive dies, this
Agreement shall terminate effective as of the date of the Executive's
death, and thereupon the Executive's estate shall be entitled solely to
the payments and benefits set forth in Section 8(b) hereof.
(b) DISABILITY. If the Executive has been unable to perform his
obligations hereunder for six consecutive months, or for at least 180 days
during any calendar year, due to Disability, the Company shall thereafter
have the right to terminate the Executive's employment hereunder upon at
least 30 days' prior written notice to the Executive of the effective date
of such termination, and thereupon the Executive shall be entitled solely
to the payments and benefits set forth in Section 8(b) hereof.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company shall
have the right to terminate the Executive's employment hereunder for Cause
(as hereafter defined), and thereupon the Executive shall be entitled
solely to the payments and benefits set forth in Section 8(a) hereof. For
purposes of this Agreement, the term "CAUSE" shall mean any of the
following: (i) conviction of the Executive by a court of competent
jurisdiction for commission of any felony, (ii) the Executive's failure or
refusal to perform substantially his duties with the Company which failure
or refusal continues for thirty days following the Executive's receipt of
written notice specifying the nature and manner of such failure or refusal
to perform, (iii) the Executive's willful misconduct or gross negligence
which is injurious to the Company or its reputation and goodwill, (iv) a
Forfeiture Event, or (v) the Executive's breach of Section 9, 10, 11, 12
or 13 of this Agreement.
(d) RESIGNATION OR RETIREMENT. If the Executive resigns or
retires, this Agreement shall terminate as of the date of the Executive's
resignation or retirement, and thereupon the Executive shall be entitled
solely to the payments and
<PAGE>
-6-
benefits set forth in Section 8(b), except that, if the Executive's
resignation or retirement is for any reason other than Good Reason (as
hereinafter defined), then, as of the date of the Executive's resignation
or retirement, the Executive shall be entitled instead solely to the
payments and benefits set forth in Section 8(a). "GOOD REASON" shall
mean any of the following: (i) a request that the Executive permanently
relocate to a location not in the Minneapolis, Minnesota metropolitan area
that the Executive rejects within 30 days of the request and, upon such
rejection, the relocation request not being rescinded or (ii) a failure or
refusal by the Company to provide duties for the Executive to perform
which are consistent with the position of a senior executive officer of
the Company which failure or refusal continues for thirty days following
the Company's receipt of written notice specifying the nature and manner
of such failure or refusal to perform.
8. EFFECT OF EARLY TERMINATION.
(a) CAUSE OR RESIGNATION OR RETIREMENT FOR OTHER THAN GOOD
REASON. Upon the early termination of this Agreement by the Company for Cause
or upon the resignation or retirement of the Executive for other than Good
Reason, the Company shall pay to the Executive (i) his Salary accrued through
the effective date of termination, payable at the time such payment is otherwise
due and payable hereunder, and (ii) all other amounts and benefits to which the
Executive is entitled, including, without limitation, vacation pay and expense
reimbursement amounts accrued to the effective date of termination and amounts
and benefits owing under the terms of any benefit plan of the Company in which
the Executive participates, and the Company and the Executive shall have no
further obligation to each other under this Agreement except as provided in
Section 16.
(b) OTHER TERMINATION. Upon the early termination of this
Agreement pursuant to Section 7(a), 7(b) or 7(d) (in the case of the resignation
or retirement of the Executive for Good Reason), the Company shall pay to the
Executive an amount equal to the remaining Salary which otherwise would have
been payable to the Executive until the Expiration Date (the "SEVERANCE
AMOUNT") plus all other amounts and benefits to which the Executive is entitled
accrued to the effective date of termination, including, without limitation,
expense reimbursement amounts and amounts and benefits owing under the terms of
any benefit plan of the Company in which the Executive participates. The
Severance Amount shall be paid in a lump sum equal to the net present value of
the Severance Amount, determined by discounting the aggregate Severance Amount
using a
<PAGE>
-7-
discount rate equal to the yield on the date of such termination of United
States Treasury Securities having a maturity closest to one year from such date.
9. NON-SOLICITATION AGREEMENT. The Executive covenants and
agrees that while employed by the Company and for a period of one year
immediately following the effective date of any employment termination, the
Executive will not in any way, directly or indirectly, on the Executive's own
behalf or on behalf of or in conjunction with any other person, partnership,
firm or corporation, solicit, divert, take away, or attempt to take away any
person, partnership, firm or corporation (or the business or patronage) that has
been a customer of the Company or any of its affiliated entities. The Executive
further agrees that, for such period, the Executive will not in any way,
directly or indirectly, on the Executive's own behalf or on behalf of or in
conjunction with any person, partnership, firm or corporation, solicit, entice,
hire, employ or endeavor to employ any employee of the Company or any of its
affiliated entities.
10. AGREEMENT NOT TO COMPETE. The Executive covenants and
agrees that he will not, during the term of his employment with the Company, and
so long as the Executive has been paid any payments due under Sections 4 and 8
above, for a period of one year following termination of such employment, either
directly or indirectly, as an employee, director, officer, shareholder, partner,
advisor, consultant or otherwise, engage in any commercial activity or
participate in any venture of any kind that competes with the Company with
respect to the delivery of home health care products and services within any
area which constitutes a Restricted Geographic Area at the date of such
termination. "RESTRICTED GEOGRAPHIC AREA" at any date means the areas which
are within a fifty-mile radius of any city, town or other population center in
which, at such date, the Company operates a professional home health care
facility.
Nothing stated in this Section 10 shall be deemed to preclude the
Executive from holding less than 5% of the outstanding capital stock of any
corporation required to file periodic reports with the Securities and Exchange
Commission under Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, and the securities of which are listed on any securities exchange or
quoted on the Nasdaq National Market or traded on the over-the-counter market.
The Executive acknowledges that the Company has expended substantial
time and expense in the research and development of processes, technology,
techniques and products which are unique to
<PAGE>
-8-
the Company or not generally known to others and which could be unfairly taken
or used by others in competition with the Company. Accordingly, the Executive
agrees that the restrictions contained in this Agreement are reasonable.
If the scope of the restrictions contained in this Section 10 is too
broad to permit enforcement of such restrictions to their full extent, then such
restrictions shall be construed or re-written (blue-lined) so as to be
enforceable to the maximum extent permitted by law, and the Executive hereby
consents, to the extent he may lawfully do so, to the judicial modification of
the scope of such restrictions in any proceeding brought to enforce such
restrictions. In the event of any breach by the Executive of this Section 10,
the Company may elect to institute and prosecute proceedings in any state or
federal court located in the State of Minnesota, either at law or in equity, to
seek to obtain specific performance of any part of this Agreement, to seek
injunctive relief against the Executive to temporarily or permanently enjoin the
violation of this Section 10 and/or to seek to recover any damages resulting
from the breach of this Section 10, and to recover attorneys' fees and costs in
connection with the institution and prosecution of such proceedings. In any
such proceedings, the Executive shall be entitled to seek to recover his
attorneys' fees and costs in connection with such proceedings. No remedy
available to the Company for a breach of this Section 10 is intended to be
exclusive of any other remedy and all remedies are cumulative. The Executive
agrees that damages are not adequate to compensate the Company for any breach by
the Executive of this Agreement and hereby waives the defense of an adequate
remedy at law or any other remedy at law and admits and concedes that there are
none.
11. CONFIDENTIAL INFORMATION. The Executive covenants and
agrees not to at any time use, divulge, furnish or make accessible to anyone
other than the Company, its affiliated entities, or its or their directors and
officers, any proprietary or confidential information ("CONFIDENTIAL
INFORMATION") of the Company or any of its affiliated entitles, including but
not limited to information regarding the development of the Company's products,
or the provision of the Company's services, or the Company's customer lists.
Upon termination of his employment with the Company, the Executive
agrees to deliver to the Company all written materials that constitute
Confidential Information. Further, upon termination of his employment with the
Company, the Executive agrees to make available to any person designated by the
Company all information concerning pending or preceding transactions which
<PAGE>
-9-
may affect the operation of the Company or any subsidiary of the Company about
which the Executive has knowledge. The obligations of the Executive contained
in this paragraph are in addition to the obligation of the Executive to return
to the Company, upon the termination of his employment, all property of the
Company then in his possession.
12. ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS. The Executive
shall promptly disclose to the Company all inventions, discoveries,
improvements, designs, processes, techniques, equipment, trademarks or
copyrightable matter conceived or made by the Executive during the Executive's
employment and related to any aspect of the business of the Company, and the
Executive hereby assigns all of the Executive's interest therein, including the
goodwill of the business symbolized by any trademarks, to the Company. The
Executive further agrees to execute any applications, assignments or other
instruments which the Company shall deem necessary to obtain letters patent,
trademark registration or copyright registration of the United States or any
foreign country or to otherwise protect the Company's interest therein. Nothing
contained in this provision shall apply to any invention for which no equipment,
supplies, facility or trade secrets information of the Company or any affiliated
entity of the Company was used and which was developed entirely on the
Executive's own time, and (a) which does not relate (1) to any aspect of the
business of the Company or any affiliated entity of the Company or (2) to the
actual or demonstrably anticipated research or development of the Company or any
affiliated entity of the Company, or (b) which does not result from any work
performed by the Executive for the Company or any affiliated entity of the
Company.
13. ASSISTANCE IN LITIGATION. During the Employment Term, the
Executive shall, upon reasonable notice, furnish such information and proper
assistance to the Company as may reasonably be required by the Company in
connection with any litigation in which it is, or may become, a party.
14. FEDERAL INCOME TAX WITHHOLDING. The Company shall withhold
from any benefits payable pursuant to this Agreement such Federal, State, City
or other taxes as may be required to be withheld pursuant to any law or
governmental regulations or ruling.
15. EFFECT OF PRIOR AGREEMENTS. This Agreement contains the
entire understanding between the parties hereto respecting the Executive's
employment by the Company and supersedes any prior employment agreement or
arrangement between the Company and the Executive.
<PAGE>
-10-
16. INDEMNIFICATION. The Company shall indemnify and hold the
Executive harmless to the fullest extent legally permissible under the Minnesota
Business Corporation Act, as amended from time to time, against any and all
expenses, liabilities and losses (including attorneys' fees, judgments, fines
and amounts paid in settlement) reasonably incurred or suffered by him in
connection with service as an officer of the Company pursuant to Section 3
hereof or any other service or function served by him on behalf of the Company
or at the Company's request; PROVIDED, HOWEVER, that, the Executive shall
not be entitled to indemnification hereunder if the expenses, liabilities and
losses referred to above resulted from or relate to willful misconduct or gross
negligence by the Executive or any material misrepresentation by the Company in
the Securities Purchase and Sale Agreement of which the Executive had actual
knowledge. The Company shall advance to the Executive the amount of his
expenses incurred in connection with any proceeding relating to any such service
or function to the fullest extent legally permissible under the Minnesota
Business Corporation Act. The indemnification and expense reimbursement
obligations of the Company in this Section 16 will continue as to the Executive
after he ceases to be an officer of the Company and shall inure to the benefit
of his heirs, executors and administrators. The Company shall not, without the
Executive's written consent, cause or permit any amendment to the Company's
governing documents which would affect the Executive's rights to indemnification
and expense reimbursement thereunder.
17. GENERAL PROVISIONS.
(a) NONASSIGNABILITY. Neither this Agreement nor any right or
interest hereunder shall be assignable by the Executive, his beneficiaries, or
legal representatives without the Company's prior written consent.
(b) BINDING AGREEMENT. This Agreement shall be binding upon,
and inure to the benefit of, the Executive and the Company and their respective
heirs, executors, administrators, successors and permitted assigns.
(c) AMENDMENT OF AGREEMENT. This Agreement may not be modified
or amended except by an instrument in writing signed by the parties hereto.
(d) WAIVER. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by written instrument of
the party charged with such waiver or estoppel.
<PAGE>
-11-
(e) SEVERABILITY. If, for any reason, any provision of this
Agreement is held invalid, such invalidity shall not affect any other provision
of this Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect.
(f) NOTICES. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified or registered mail, return receipt requested, postage prepaid,
if to the Executive, addressed to Kenneth J. Figge, 2004 Sugar Woods Drive,
Orono, Minnesota 55356; if to the Company, addressed to In Home Health, Inc.,
Carlson Center, Suite 500, 601 Lakeshore Parkway, Minnetonka MN 55305-5214 and
directed to the attention of the chief executive officer of the Company with a
copy to the secretary of the Company; or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
(g) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(h) INDULGENCES, ETC. Neither the failure nor any delay on the
part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence.
(i) HEADINGS. The headings of paragraphs herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
(j) GOVERNING LAW. This Agreement is governed by the laws of
the State of Minnesota, and its validity, interpretation, performance, and
enforcement shall be governed by the laws of said State.
<PAGE>
-12-
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has signed this
Agreement, all as of the day and year first above written.
IN HOME HEALTH, INC.
By:
-------------------------------------
Name:
Title:
---------------------------------
Kenneth J. Figge
<PAGE>
EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is made and
entered into as of , 1995, by and between IN HOME HEALTH, INC., a
Minnesota corporation (the "ISSUER"), and MANOR HEALTHCARE CORP., a Delaware
corporation (the "PURCHASER").
This Agreement is made in connection with that certain Securities
Purchase and Sale Agreement dated as of May 2, 1995 by and between the Issuer
and the Purchaser (the "PURCHASE AGREEMENT"). In order to induce the
Purchaser to enter into the Purchase Agreement, the Issuer has agreed to provide
to the Purchaser and its transferees the registration rights with respect to the
Registrable Securities (as hereinafter defined), as set forth in this Agreement.
The parties hereby agree as follows:
1. SECURITIES SUBJECT TO THIS AGREEMENT
(a) DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"ACT" means the Securities Act of 1933, as amended.
"COMMISSION" has the meaning set forth in Section 2(a) hereof.
"COMMON STOCK" means the common stock, par value $.01 per share,
of the Issuer.
"CONVERSION SHARES" means the shares of Common Stock issuable or
issued upon conversion of the Preferred Stock pursuant to the terms thereof.
"EFFECTIVE DATE" has the meaning set forth in Section 2(a) hereof.
"MAJORITY AMOUNT" means an amount of Registrable Securities
beneficially owned which represents a majority of the shares of Common Stock or
other securities then constituting Registrable Securities.
"PIGGYBACK REGISTRATION" has the meaning set forth in Section 3
hereof.
<PAGE>
-2-
"PREFERRED STOCK" means the convertible preferred stock of the
Issuer to be issued and sold to the Purchaser under the Purchase Agreement.
"REGISTRABLE SECURITIES" means the Shares, the Conversion Shares
and the Warrant Shares and any other securities issued or issuable with respect
to the Shares, the Conversion Shares or the Warrant Shares (including as a
result of the operation of "anti-dilution" provisions in the Preferred Stock and
the Warrant) by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or pursuant to a dividend, distribution or issuance of other
assets or securities; PROVIDED, HOWEVER, that a security ceases to be a
Registrable Security when it is no longer a Restricted Security.
"REGISTRATION EXPENSES" has the meaning set forth in Section 6
hereof.
"RESTRICTED SECURITY" means any Registrable Security until such
Registrable Security (i) has been effectively registered under the Act and
disposed of by the Purchaser or any other holder in accordance with a
registration statement filed under the Act covering such disposition by the
Purchaser or such holder or (ii) is distributed to the public pursuant to Rule
144 under the Act.
"SHARES" means the Shares of Common Stock of the Issuer to be
issued and sold to the Purchaser under the Purchase Agreement.
"SHELF REGISTRATION" has the meaning set forth in Section 2(a)
hereof.
"WARRANT" means the warrant to purchase shares of Common Stock of
the Issuer to be issued and sold to the Purchaser under the Purchase Agreement.
"WARRANT SHARES" means the shares of Common Stock issuable or
issued upon exercise of the Warrant pursuant to the terms thereof.
(b) HOLDERS OF REGISTRABLE SECURITIES. A person is deemed to be
a holder of Registrable Securities whenever such person owns Registrable
Securities or has a right to acquire such Registrable Securities, whether or not
such acquisition has actually been effected, and disregarding any legal
restrictions upon the exercise of such right; PROVIDED, HOWEVER, that unless
the
<PAGE>
-3-
Issuer is otherwise notified by the holder of a Registrable Security, the holder
of a Registrable Security shall be deemed to be that person set forth on the
books of the Issuer or the registrar for such Registrable Security or, with
respect to the Warrant Shares and the Conversion Shares, the registered holders
of the Warrant or the Preferred Stock, as the case may be.
2. DEMAND REGISTRATION
(a) EFFECTIVE REGISTRATION. The Issuer agrees to file as soon
as reasonably practicable, upon the written request of the Purchaser and/or
holders of a Majority Amount of Registrable Securities, but in no event later
than forty-five days from the date of such request, a "shelf" registration
statement on any appropriate form pursuant to Rule 415 under the Act and/or any
similar rule that may be adopted by the Securities and Exchange Commission (the
"COMMISSION"), with respect to all of the Registrable Securities as to which
the request pertains (the "SHELF REGISTRATION"). The Issuer agrees to use its
best efforts to have the Shelf Registration declared effective as soon as
reasonably practicable after such filing and to keep the Shelf Registration
continuously effective for a period expiring (A) one year or (B) 180 days in the
case of any Shelf Registration not on Form S-3 (or, if for any reason the
effectiveness of the Shelf Registration is suspended, such period set forth in
clauses (A) and (B) shall be extended by the aggregate number of days of each
such suspension) following the date on which the Shelf Registration is declared
effective (the "EFFECTIVE DATE"). The Issuer shall file any such Shelf
Registration requested at any time permitted to be effected on Form S-3;
PROVIDED, HOWEVER, that the Issuer shall not be required to comply with more
than two requests for a Shelf Registration under this Agreement for the
Purchaser and any other holders of Registrable Securities on a registration form
other than Form S-3. The Issuer may be required to have multiple Shelf
Registrations filed and/or effective concurrently.
Prior to filing any Shelf Registration, the Issuer shall notify all
holders of Registrable Securities of the request for filing of the Shelf
Registration and shall give each holder of Registrable Securities not less than
20 days to notify the Issuer of whether such holder intends to include
Registrable Securities in such Shelf Registration and the number of Registrable
Securities so to be included.
The Issuer further agrees, if necessary, to supplement or amend any
Shelf Registration, as required by the registration form utilized by the Issuer
or by the instructions applicable to such
<PAGE>
-4-
registration form or by the Act or the rules and regulations thereunder or as
reasonably requested by the Purchaser and/or the holders of a Majority Amount.
The Issuer agrees to pay all Registration Expenses in connection with each Shelf
Registration, whether or not it becomes effective. In no event shall a Shelf
Registration include securities other than Registrable Securities, unless the
Purchaser or, if the Purchaser no longer is a holder of Registrable Securities,
the holders of a Majority Amount consent to such inclusion.
(b) SELECTION OF UNDERWRITERS AND COUNSEL. If any offering
pursuant to a Shelf Registration involves an underwritten offering, the
Purchaser or, if the Purchaser no longer is a holder of Registrable Securities,
holders of a Majority Amount to be registered shall have the right to select the
investment banker or bankers and manager or managers to administer the offering.
The holders of the Registrable Securities to be registered shall pay all
underwriting discounts and commissions or placement fees of such investment
banker or bankers and manager or managers and the fees and disbursements of
counsel for the sellers of the Registrable Securities.
3. PIGGYBACK REGISTRATION
If the Issuer proposes to file a registration statement under the
Act with respect to an offering by the Issuer for its own account or for the
account of others of Common Stock or other securities (other than a registration
statement on Forms S-4 or S-8 or filed in connection with an exchange offer or
an offering of securities solely to the Issuer's existing stockholders), then
the Company shall in each case give written notice of such proposed filing to
the holders of Registrable Securities at least twenty days before the
anticipated filing date, and such notice shall offer such holders the
opportunity to register such amount of Registrable Securities as each such
holder may request (a "PIGGYBACK REGISTRATION"). The Issuer shall use its
best efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the holders of Registrable Securities requested
to be included in the registration for such offering to include such securities
in such offering on the same terms and conditions as any similar securities of
the Issuer included therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such offering delivers an opinion to the holders
of Registrable Securities that the total amount of securities which they, the
Issuer and any other persons or entities intend to include in such offering is
sufficiently large to materially and adversely affect the success of such
offering, then the amount of shares to be offered for the accounts of holders of
<PAGE>
-5-
Registrable Securities shall be reduced pro rata with respect to each holder to
the extent necessary to reduce the total amount of securities to be included in
such offering to the amount recommended by such managing underwriter;
PROVIDED, HOWEVER, that if securities are being offered for the account of
other persons or entities as well as the Issuer, such reduction shall not
represent a greater fraction of the amount of securities intended to be offered
by holders of Registrable Securities than the fraction of similar reductions
imposed on such other persons or entities with respect to the amount of
securities they intended to offer. In connection with a Piggyback Registration,
the Issuer will pay all Registration Expenses (as defined in Section 6 below),
except where otherwise required by applicable law.
4. HOLDBACK AGREEMENTS
(a) RESTRICTIONS ON PUBLIC SALE BY HOLDERS OF REGISTRABLE
SECURITIES. To the extent not inconsistent with applicable law, each holder of
Registrable Securities whose securities are included in a Shelf Registration and
each holder of Registrable Securities who has been offered the opportunity but
declined to have its securities included in a Shelf Registration agrees not to
effect any public sale or distribution of the issue being registered or a
similar security of the Issuer, or any securities convertible into or
exchangeable or exercisable for such securities, including a sale pursuant to
Rule 144 under the Act, during the five business days prior to, and during the
60-day period beginning on, the effective date of such Shelf Registration
(except as part of such registration), if and to the extent timely notified in
writing by the Issuer, in the case of a non-underwritten public offering, or by
the managing underwriter or underwriters, in the case of an underwritten public
offering.
The foregoing provisions shall not apply to any holder of
Registrable Securities if such holder is prevented by applicable statute or
regulation from entering into any such agreement; provided, however, that any
such holder whose Securities are included in a Shelf Registration shall
undertake, in its request to participate in any such public offering, not to
effect any public sale or distribution (except as a part of such registration)
of any Registrable Securities commencing on the date of effectiveness of such
Shelf Registration unless it has provided 45 days' prior written notice of such
sale to the Issuer, in the case of a non-underwritten public offering, or the
managing underwriter or underwriters, in the case of an underwritten public
offering.
(b) RESTRICTIONS ON PUBLIC SALE BY THE ISSUER AND OTHERS. The
Issuer agrees, shall cause its subsidiaries to agree,
<PAGE>
-6-
and agrees to use its best efforts to cause its and its subsidiaries' officers
and directors to agree if requested by the managing underwriter or managing
underwriters (i) not to effect any public sale or distribution of any securities
similar to those being registered, or any securities convertible into or
exchangeable or exercisable for such securities during the fifteen days prior
to, and for up to a 90-day period (depending upon the request of the managing
underwriter or managing underwriters) beginning on, (x) the date on which a
registration statement in which the holders of Registrable Securities are
participating and which registration statement relates to an underwritten
offering of Registrable Securities is expected to be declared effective (except
as part of such registration, or except pursuant to a registration of securities
on Form S-4 or Form S-8, or any form substituting therefor) or, if later, (y)
the expected date of the commencement of a public distribution of the
Registrable Securities pursuant to such registration statement and (ii) that any
agreement entered into after the date of this Agreement pursuant to which the
Issuer or any of its subsidiaries issues or agrees to issue any privately placed
securities similar to the Registrable Securities shall contain a provision under
which holders of such securities agree not to effect any public sale or
distribution of any such securities during the periods described in (i) above,
in each case including a sale pursuant to Rule 144 (or any similar provision
then in force) under the Act (except as part of any such registration, if
permitted, or when prevented by applicable statute or regulation from entering
into such an agreement).
5. REGISTRATION PROCEDURES
In connection with each Shelf Registration and any Piggyback
Registration, the Issuer hereby covenants to:
(a) before filing a registration statement or prospectus or any
amendments or supplements thereto, including documents incorporated by reference
after the initial filing of the registration statement, furnish to each seller
of such Registrable Securities covered by such registration statement and the
underwriters, if any, draft copies of all such documents proposed to be filed at
least five business days prior thereto, which documents will be subject to the
reasonable review of such sellers and underwriters, and the Issuer will not file
any registration statement or amendment thereto or any prospectus or any
supplement thereto (including such documents incorporated by reference) to which
the Purchaser or sellers holding a Majority Amount covered by such registration
statement or the underwriters, if any, shall reasonably object and will notify
each holder of the Registrable Securities included in such registration
statement of any stop
<PAGE>
-7-
order issued or threatened by the Commission in connection therewith and take
all reasonable actions required to prevent the entry of such stop order or to
remove it if entered;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the registration statement as may be necessary to
keep the registration statement effective for as long as such registration is
required to remain effective pursuant to the terms hereof in the case of each
Shelf Registration; cause the prospectus to be supplemented by any required
prospectus supplement, and, as so supplemented, to be filed pursuant to Rule 424
under the Act; and comply with the provisions of the Act applicable to it with
respect to the disposition of all Registrable Securities covered by such
registration statement during the applicable period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement or supplement to the prospectus;
(c) furnish to any seller of such Registrable Securities and the
underwriter or underwriters, if any, without charge, at least one conformed copy
of the registration statement and any post-effective amendment thereto, as soon
as such documents become available to the Issuer, and such number of additional
copies thereof and such number of copies of the prospectus (including each
preliminary prospectus) and any amendments or supplements thereto, and any
documents incorporated by reference therein, as such seller or underwriter may
reasonably request as soon as such documents become available to the Issuer in
order to facilitate the disposition of such Registrable Securities being sold
by such seller (it being understood that the Issuer consents to the use of the
prospectus and any amendment or supplement thereto by each seller of such
Registrable Securities and the underwriter or underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
the prospectus or any amendment or supplement thereto);
(d) on or prior to the date on which the registration statement is
declared effective, use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of such Registrable Securities owned by such
seller; provided that the Issuer will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (d) or (ii) consent to general service of process
in any such jurisdiction;
<PAGE>
-8-
(e) use its best efforts to cause the Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Issuer to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities;
(f) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the Act, of
the happening of any event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Issuer will prepare a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
(g) enter into customary agreements (including an underwriting
agreement in customary form in the case of an underwritten offering) and make
such representations and warranties to the underwriters as in form and substance
and scope are customarily made by issuers to underwriters in primary and
secondary underwritten offerings and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities;
(h) make available for inspection by any seller of such
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or other
agent retained by any such seller or underwriter (collectively, the
"INSPECTORS"), all pertinent financial and other records, pertinent corporate
documents and properties of the Issuer (collectively, the "RECORDS"), as shall
be reasonably necessary to enable them to exercise "due diligence," and cause
each of the Issuer's officers, directors and employees to supply all information
reasonably requested by any such Inspector in connection with such registration
statement. Sellers of Registrable Securities hereunder agree that Records and
other information which the Issuer determines in good faith to be confidential,
and of which determination the Inspectors and sellers are so notified, shall not
be disclosed by the Inspectors or sellers unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in the
registration statement or (ii) the release of such Records is required pursuant
<PAGE>
-9-
to a subpoena, court order or regulatory or agency request or (iii) the
information in such Records has been made generally available to the public.
The seller of Registrable Securities agrees that it will, upon learning that
disclosure of the Records is sought in a court of competent jurisdiction or by a
governmental agency, give notice to the Issuer and allow the Issuer, at the
Issuer's expense, to undertake appropriate action to prevent disclosure of the
Records deemed confidential;
(i) in the event such sale is pursuant to an underwritten
offering, obtain a "cold comfort" letter from the Issuer's independent public
accountants in customary form and covering such matters as are of the type
customarily covered by "cold comfort" letters as the selling holders of such
Registrable Securities or the managing underwriters reasonably request;
(j) obtain an opinion or opinions from counsel for the Issuer in
customary form and covering such matters as are customary for transactions of
this nature as the selling holders of Registrable Securities or the managing
underwriters reasonably request;
(k) otherwise comply with all applicable rules and regulations of
the Commission, and make available to its security holders, as soon as
reasonably practicable, earnings statements, which need not be audited, covering
a period of twelve months, beginning within three months after the effective
date of the registration statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Act and Rule 158 thereunder;
(l) cooperate with each seller of Registrable Securities and each
underwriter participating in the disposition of such Registrable Securities and
their respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD"); and take
such action as may be necessary to list or have admitted for trading the
Registrable Securities on any national securities exchange on the Nasdaq
National Market on which shares of Common Stock are then listed or admitted for
trading;
(m) if requested by the managing underwriter or underwriters or
any seller, promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or underwriters or such
seller reasonably requests to be included therein, including, without
limitation, the number of Registrable Securities being sold by such seller to
such underwriter or underwriters, the purchase price being paid therefor by such
underwriter or underwriters and any other terms of the
<PAGE>
-10-
underwritten offering of the Registrable Securities to be sold in such offering;
and promptly make all required filings of such prospectus supplement or
post-effective amendment;
(n) as promptly as practicable after filing with the Commission of
any document which is incorporated by reference into a registration statement,
deliver a copy of such document to each seller of such Registrable Securities;
(o) cooperate with the sellers of such Registrable Securities and
the managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legends)
representing securities to be sold under the registration statement and enable
such securities to be in such denominations or amounts, as the case may be, and
registered in such names as the managing underwriter or underwriters, if any, or
such sellers may request;
(p) notify the sellers of Registrable Securities covered by the
registration statement and the managing underwriters, if any, promptly and (if
requested by any such person) confirm such advice in writing of the receipt by
the Issuer of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
(q) use its reasonable efforts to take all other steps necessary
to effect the registration of the Registrable Securities contemplated hereby.
Each holder of Registrable Securities agrees that, upon receipt of
any notice from the Issuer of the happening of any event of the kind described
in Section 5(f) hereof, such holder will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 5(f) hereof and, if
so directed by the Issuer, such holder will deliver to the Issuer (at the
expense of the Issuer) all copies, other than permanent file copies then in such
holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Issuer shall
give any such notice, the Issuer shall extend the period during which such
registration statement shall be maintained effective pursuant to this Agreement
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 5(f) hereof, to and including the date
when each seller of Registrable Securities covered by such registration
statement shall
<PAGE>
-11-
have received the copies of the supplemented or amended prospectus contemplated
by Section 5(f) hereof.
6. REGISTRATION EXPENSES
All expenses incident to the Issuer's performance of or compliance
with this Agreement including, without limitation, all registration and filing
fees, all fees and expenses associated with filings required to be made with the
NASD, fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), printing expenses, marketing
expenses, fees and expenses of counsel for the Issuer and its independent
certified public accountants (including audit fees), and fees and expenses of
any special counsel for the Issuer or consultants for the Issuer (all such
expenses being herein called "REGISTRATION EXPENSES") will be borne by the
Issuer.
7. INDEMNIFICATION; CONTRIBUTION
(a) INDEMNIFICATION BY THE ISSUER. The Issuer agrees to
indemnify, to the full extent permitted by law, each holder of Registrable
Securities, its officers, directors, employees and agents and each person who
controls such holder (within the meaning of the Act), and any investment advisor
thereof or agent therefor against all losses, claims, damages, liabilities and
expenses (including costs of investigation and legal expenses) arising out of or
based upon any untrue or alleged untrue statement of a material fact contained
in any registration statement, prospectus or preliminary prospectus or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus or preliminary prospectus, in light of the circumstances under which
they are made) not misleading, except insofar as the same are arising out of or
based upon or contained in any information with respect to such holder furnished
in writing to the Issuer by such holder or its underwriter expressly for use
therein. The Issuer will also indemnify any underwriters of the Registrable
Securities, their officers and directors and each person who controls such
underwriters (within the meaning of the Act) to the same extent as provided
above with respect to the indemnification of the holders of Registrable
Securities.
(b) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. In
connection with any registration statement in which a holder of Registrable
Securities is participating, each such holder will furnish to the Issuer, in
writing, such information and affidavits with respect to such holder as the
Issuer reasonably
<PAGE>
-12-
requests for use in connection with any such registration statement or
prospectus and agrees, severally, to indemnify, to the extent permitted by law,
the Issuer, its directors, officers, employees and agents and each person who
controls the Issuer (within the meaning of the Act), against any losses, claims,
damages, liabilities and expenses resulting from any untrue statement of a
material fact or any omission of a material fact required to be stated in the
registration statement or prospectus or any amendment thereof or supplement
thereto or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, to the extent, but only to the extent, that such untrue statement or
omission is contained in or failed to be contained in any information or
affidavit with respect to such holder so furnished in writing by such holder
specifically for inclusion therein. In no event shall the liability of any
participating holder hereunder be greater in amount than the dollar amount of
the proceeds received by such holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person entitled
to indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such person of any written notice of the
commencement of any action, suit or proceeding against such person or
investigation thereof made in writing for which such person will claim
indemnification or contribution pursuant to this Agreement and, unless in the
reasonable judgment of such indemnified party a conflict of interest may exist
between such indemnified party and the indemnifying party with respect to such
claim or unless there may be different or additional defenses available to the
indemnified party, permit the indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to such indemnified party. If the
indemnifying party is not entitled to, or elects not to, assume the defense of a
claim, the indemnified party shall have the right to retain counsel at the
expense of the indemnifying party; PROVIDED, HOWEVER, that the indemnifying
party will not be obligated to pay the fees and expenses of more than one
counsel (in addition to local counsel) with respect to such claim. No
indemnified party will be required to consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect of such claim or litigation. The indemnifying party
will not be subject to any liability for any settlement made without its
consent, which shall not be unreasonably withheld.
<PAGE>
-13-
(d) CONTRIBUTION. If the indemnification provided for in this
Section 7 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions or
inactions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 7(c), any
legal or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7(d), an indemnified holder of
Registrable Securities shall not be required to contribute any amounts in excess
of the amount by which the total price at which the Registrable Securities were
sold by such indemnified holder and distributed to the public exceeds the amount
of any damages which such indemnified holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omissions. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Sections 7(a) and (b) without regard to the relative fault of said
indemnifying party or indemnified party or
<PAGE>
-14-
any other equitable consideration provided for in this Section 7(d).
In the event that any provision of an indemnification clause in an
underwriting agreement executed by or on behalf of a holder of Registrable
Securities differs from a provision in this Section 7, such provision in the
underwriting agreement shall determine such holder's rights in respect thereof.
8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No person may participate in any underwritten registration hereunder
unless such person (a) agrees to sell such person's Registrable Securities on
the basis provided in any underwriting arrangements approved by the persons
entitled hereunder to approve such arrangements, (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements and (c) agrees to pay such person's pro rata portion of all
underwriting discounts, commissions and fees. The Issuer will use its best
efforts to assist with the underwriters' distribution requirements, including
participating in "roadshow" meetings with investors, as the managing
underwriters may reasonably request.
9. RULE 144
The Issuer covenants that it will file the reports required to be
filed by the Issuer under the Act and the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") and the rules and regulations adopted by the
Commission thereunder; and it will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Act within the limitation of the exemptions provided by
(a) Rule 144 under the Act, as such Rule may be amended from time to time, or
(b) any similar rule or regulation hereafter adopted by the Commission. Upon
the reasonable request of any holder of Registrable Securities, the Issuer will
deliver to such holder a written statement as to filings made by the Issuer with
the Commission.
10. MISCELLANEOUS
(a) NO INCONSISTENT AGREEMENTS. The Issuer will not hereafter
enter into any agreement with respect to any of its securities which contains
provisions more favorable to the holders thereof than the provisions contained
in this Agreement without
<PAGE>
-15-
providing for the granting of comparable rights to the holders of Registrable
Securities in this Agreement. The Issuer will not enter into any agreement with
respect to any of its securities which will grant to any person piggy-back
rights with respect to any Shelf Registration.
(b) REMEDIES. Each holder of Registrable Securities, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Issuer agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by them of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(c) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Issuer has obtained the written consent of the
Purchaser and of holders of at least a Majority Amount affected by such
amendment, modification, supplement, waiver or departure; PROVIDED, HOWEVER,
that no such amendment, modification or supplement to, or waiver or consent in
respect of, Section 7 hereof shall be effective as to any holder of Registrable
Securities without the consent of such holder to such amendment, modification,
supplement, waiver or consent.
(d) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made by hand delivery or registered first-class
mail:
(i) if to Manor Healthcare Corp., at:
Manor Healthcare Corp.
10750 Columbia Pike
Silver Spring, MD 20901
Attention: General Counsel
(ii) if to another holder of Registrable Securities, at the most
current address, and with a copy to be sent to each additional address
given by such holder to the Issuer;
<PAGE>
-16-
(iii) if to the Issuer, at:
In Home Health, Inc.
Carlson Center, Suite 500
601 Lakeshore Parkway
Minnetonka, Minnesota 55305-5214
Attention: President
All such notices and communications shall be deemed to have been
duly given when delivered by hand, if personally delivered, or two business days
after being deposited in the mail, postage prepaid, if mailed.
(e) SUCCESSORS AND ASSIGNS. This agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto. Any holder of a Registrable Security, whether or not the Purchaser,
shall be entitled to the benefits of this Agreement.
(f) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THAT STATE WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(i) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
holders of the Registrable Securities shall be enforceable to the fullest extent
permitted by law.
(j) SECURITIES HELD BY THE ISSUER OR ITS AFFILIATES. Whenever
the consent or approval of holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Issuer or
its controlled
<PAGE>
-17-
affiliates (other than the Purchaser or subsequent holders of Registrable
Securities if such subsequent holders are deemed to be such affiliates solely by
reason of their holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the holders of such
required percentage.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written.
IN HOME HEALTH, INC.
By: ____________________
Accepted and Agreed to:
MANOR HEALTHCARE CORP.
By: _________________________
<PAGE>
EXHIBIT G
FORM OF RESOLUTION ADOPTED BY THE DIRECTORS OF THE SELLER
Form of resolution to be included in resolutions relating to
transaction:
NOW, THEREFORE, BE IT RESOLVED, that contingent upon the closing of
the Investment, the Company accepts the resignations of Messrs. Finkle and
Lieberbaum as directors of the Company to be effective upon the closing of the
transactions under the Investment Agreement; and
RESOLVED FURTHER, that effective as of the Closing of the Investment
Agreement and without any further action of the Board of Directors, the size of
the Board of Directors of the Company shall be, and it hereby is, expanded
pursuant to Bylaw Article III, Section 2 to consist of seven members and each of
Mark L. Gildea, Donald C. Tomasso, Joseph Buckley and James H. Rempe, or such
other persons as may be designated in writing by Manor Care prior to the closing
of the Investment Agreement and agreed to by the Company, are hereby elected to
fill the vacancies created by the resignations of Messrs. Finkle and Lieberbaum
and the increase in the size of the Board of Directors from five to seven
members; and this resolution shall not be rescinded, modified or waived without
the prior written approval of Manor Care unless the Investment Agreement has
been terminated in accordance with its terms.
<PAGE>
EXHIBIT H
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of_____________, 1995, by and between
IN HOME HEALTH, INC., a Minnesota corporation (the "Company"), and JAMES J. LYNN
(the "Employee").
R E C I T A L S
A. The Employee has been employed and has made a unique
contribution to the business of the Company.
B. The Board of Directors of the Company believes that the
continued services of Employee would be of great value to the Company and is
desirous of retaining his services as contemplated hereby.
C. The Employee desires to accept employment by the Company and
to render services to the Company, on the terms and subject to the conditions
provided in this Agreement.
A G R E E M E N T:
1. EMPLOYMENT. The Company hereby agrees to employ and retain the
Employee, and the Employee agrees to be employed and retained by the Company, to
render services to the Company for the period, at the rate of compensation and
upon the other terms and conditions set forth herein. The Employee shall devote
his best efforts to his employment by the Company.
2. TERM. The term of the Employee's employment under this Agreement
(the "Employment Term") shall commence on the date hereof (the "Commencement
Date"), which is the date of consummation of the purchase by Manor Healthcare
Corp., a Delaware corporation (the "Purchaser"), of securities of the Company
pursuant to the terms and conditions of the Securities Purchase and Sale
Agreement dated as of May 2, 1995 by and between the Company and the Purchaser
(the "Securities Purchase and Sale Agreement") and shall continue until the
second anniversary of the date hereof (such date being referred to herein as the
"Expiration Date"), unless earlier terminated as provided herein.
<PAGE>
-2-
3. DUTIES.
The Employee shall serve the Company by providing certain human
resource/training services and by performing such other duties consistent
therewith. Employee shall provide forty-eight (48) to eighty (80) hours of such
services each month. Upon termination of the Employee's employment under this
Agreement or the expiration of this Agreement, the Employee shall immediately
submit his resignation from the Board of Directors (if he is then serving
thereon).
4. COMPENSATION AND REIMBURSEMENT OF EXPENSES.
(a) SALARY. For services rendered by the Employee under this
Agreement, the Company shall pay to the Employee as compensation during the
Employment Term a salary (the "Salary") at the rate of one hundred twenty
thousand dollars ($120,000) per annum. The Salary shall be payable in regular
monthly installments, with the first of such payments made on the Commencement
Date. The Employee will also be eligible to receive annual bonuses based on the
Company revenues up to a maximum amount equal to fifty (50) percent of the
Employee's salary.
(b) AUTOMOBILE ALLOWANCE. Employer shall pay to Employee an
automobile allowance of five hundred dollars ($500) per month during the term of
this Agreement.
(c) STOCK OPTION. Upon the execution of this Agreement, the
Employee shall be granted options (the "OPTIONS") to purchase 50,000 shares of
Common Stock under an amendment to the Company's 1995 Stock Option Plan approved
by the Company's stockholders (as so amended, the "1995 PLAN") which options
(i) will have an exercise price equal to the fair market value of the Common
Stock on the date of grant, (ii) will be immediately vested upon the grant
thereof, (iii) will be exercisable immediately and (iv) will have a term of ten
years from the date of grant and will expire on the tenth anniversary of the
date of grant; PROVIDED, HOWEVER, that anything herein to the contrary
notwithstanding, the Options shall expire within three months after the
termination of the Employee's employment on the terms and as provided in the
1995 Plan.
<PAGE>
-3-
(d) REIMBURSEMENT OF EXPENSES. Consistent with established
policies of the Company as in effect from time to time, the Company shall pay or
reimburse the Employee for all reasonable travel, hotel, entertainment and other
business expenses incurred by the Employee in performing his obligations under
this Agreement.
5. BENEFITS.
(a) BENEFITS PLANS. The Employee shall also be entitled to
participate, on a basis comparable to other key exempt employees of the Company,
in any benefit plan or program of the Company for which exempt employees are or
shall become eligible, including, without limitation, pension, 401(k), life and
disability insurance and stock benefits and/or plans, subject, in the case of
tax-qualified benefit plans and programs, to restrictions under applicable law.
The Employee shall be entitled, at his own expense, to continue his
participation in any group insurance plans after the termination of his
employment with the Company, to the extent required or permitted under
applicable law.
(b) VACATION. The Employee shall be entitled to vacation time
with compensation of fifteen (15) days during each twelve-month period of the
Employment Term. The Employee shall also be entitled to all paid holidays given
by the Company to its exempt employees.
(c) NO REDUCTION. There shall be no material reduction or
diminution of the benefits provided in this Section 5 (i) unless the Employee
shall have given his prior written consent to such reduction or diminution and
an equitable arrangement (embodied in an ongoing substitute or alternative
benefit or plan) has been made with respect to such benefit or plan or (ii)
except, in the case of Section 5(a), for across-the-board benefit reductions
similarly affecting all key exempt employees of the Company.
6. BENEFITS PAYABLE UPON DISABILITY.
(a) DISABILITY BENEFITS. Subject to Section 7(b) hereof, during
any period of Disability (as hereinafter defined) occurring during the
Employment Term, the Company shall continue to pay to the Employee the
compensation provided in Section 4 hereof and extend to him the benefits
provided in Sections 4 and 5 hereof; it being understood that if disability
benefits are provided under any disability policy maintained by
<PAGE>
-4-
the Company, payments under such policy shall be credited against such
obligations of the Company. As used in this Agreement, the term "Disability"
shall mean the material inability of the Employee to render his agreed-upon
services to the Company due to physical and/or mental infirmity.
(b) SERVICES DURING DISABILITY. During the Employment Term,
notwithstanding any Disability, the Employee shall, to the extent that he is
physically and mentally able to do so, furnish information and assistance to the
Company, and, upon the reasonable request in writing on behalf of the Board,
from time to time, he shall make himself available to the Company to undertake
reasonable assignments consistent with his current position with the Company
and his physical and mental health.
7. EARLY TERMINATION. This Agreement is subject to termination prior
to the termination prior to the Expiration Date, as follows:
(a) DEATH OF THE EMPLOYEE. If the Employee dies, this Agreement
shall terminate effective as of the date of the Employee's death, and thereupon
the Employee's estate shall be entitled solely to the payments and benefits set
forth in Section 8(b) hereof.
(b) DISABILITY. If the Employee has been unable to perform his
obligations hereunder for four consecutive months, or for at least 120 days
during any calendar year, due to Disability, the Company shall thereafter have
the right to terminate the Employee's employment hereunder upon at least 30
days' prior written notice to the Employee of the effective date of such
termination, and thereupon the Employee shall be entitled solely to the payments
and benefits set forth in Section 8(b) hereof.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The company shall have
the right to terminate the Employee's employment hereunder for Cause (as
hereinafter defined), and thereupon the Employee shall be entitled solely to the
payments and benefits set forth in Section 8(a) hereof. For purposes of this
Agreement, the term "Cause" shall mean any of the following: (i) the Employee's
material breach of this Agreement, which breach shall have continued for 30 days
after written notice by the Company to the Employee detailing the nature of such
breach, (ii) the Employee's conviction for any felony or misdemeanor related to
his acts or omissions as an
<PAGE>
-5-
employee of the Company, or (iii) the Employee's commission of any material act
of dishonesty, fraud or deceit or any violation of obligations under Section 12
or 13 below. Written notice of the Employee's termination for Cause shall have
been delivered to the Employee with a copy of a resolution duly adopted by the
affirmative vote of a majority of the members of the Board finding that, in the
good faith opinion of the Board, the Employee conducted himself in a manner as
set forth above in this Section 7(c) and specifying the particulars thereof.
(d) RESIGNATION OR RETIREMENT. If the Employee resigns or
retires voluntarily ("Voluntary Resignation/ Retirement"), this Agreement shall
terminate as of the date of the Employee's resignation or retirement, and
thereupon the Employee shall be entitled solely to the payments and benefits set
forth in Section 8(a). Notwithstanding the foregoing, if such resignation or
retirement is due to the material diminution of Employee's duties as set forth
in this Agreement ("Involuntary Resignation/Retirement"), Employee shall then be
entitled to the payments and benefits set forth in Section 8(b).
(e) TERMINATION FOR OTHER THAN CAUSE. The Company may terminate
Employee for any reasons, at any time, upon written notice of such intention to
terminate, but if not for Cause as stated in (c) above, Employee will be
entitled to the payments and benefits set forth in Section 8(b).
8. EFFECT OF EARLY TERMINATION.
(a) CAUSE OR VOLUNTARY RESIGNATION/RETIREMENT. Upon the early
termination of this Agreement by the Company for Cause or upon the Voluntary
Resignation/Retirement, the Company shall pay to the Employee (i) his Salary
accrued through the effective date of termination, payable at the time such
payment is otherwise due and payable hereunder, and (ii) all other vested
amounts and benefits to which the Employee is entitled, including, without
imitation, vacation pay and expense reimbursement amounts accrued to the
effective date of termination and amounts and benefits owing under the terms of
any benefit plan of the Company in which the Employee participates, and the
Company and the Employee shall have no further obligation to each other under
this Agreement except as otherwise provided herein.
(b) OTHER TERMINATION. Upon the early termination of this
Agreement pursuant to Section 7(a), 7(b), 7(e), or the
<PAGE>
-6-
Involuntary Resignation/Retirement of Employee, Employee will be entitled to the
payments and benefits due for the remaining term of this Agreement as set forth
in Sections 4 and 5, above.
9. ASSISTANCE IN LITIGATION. During the Employment Term, the Employee
shall, upon reasonable notice, furnish such information and proper assistance to
the Company as may reasonably be required by the Company in connection with any
litigation in which it is, or may become, a party.
10. FEDERAL INCOME TAX WITHHOLDING. The Company shall withhold from
any benefits payable pursuant to this Agreement such Federal, State, City or
other taxes as may be required to be withheld pursuant to any law or
governmental regulations or ruling.
11. EFFECT OF PRIOR AGREEMENTS. This Agreement contains the entire
understanding between the parties hereto respecting the Employee's employment by
the Company and supersedes any prior employment agreement or arrangement between
the Company and the Employee.
12. NON-SOLICITATION AGREEMENT. The Employee covenants and agrees that
while employed by the Company and for a period of one year immediately following
the effective date of any employment termination, the Employee will not in any
way, directly or indirectly, on the Employee's own behalf or on behalf of or in
conjunction with any other person, partnership, firm or corporation, solicit,
divert, take away, or attempt to take away any person, partnership, firm or
corporation (or the business or patronage) that has been a customer of the
Company or any of its affiliated entities. The Employee further agrees that,
for such period, the Employee will not in any way, directly or indirectly, on
the Employee's own behalf or on behalf of or in conjunction with any person,
partnership, firm or corporation, solicit, entice, hire, employ or endeavor to
employ any employee of the Company or any of its affiliated entities.
13. CONFIDENTIAL INFORMATION. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company, which shall have been obtained by the
Employee during or by reason of his employment by the Company and which shall
not be public knowledge. During and after the end of the Employment Term, the
Employee shall not, without the prior written consent of the Company,
communicate or divulge any such
<PAGE>
-7-
information, knowledge or data to anyone other than the Company and those
designated by it, except that, while employed by the Company in the business of
and for the benefit of the Company, the Employee may provide confidential
information as appropriate to attorneys, accountants, banks, or other persons or
entities engaged in business with the Company from time to time.
14. GENERAL PROVISIONS.
(a) NONASSIGNABILITY. Neither this Agreement nor any right or
interest hereunder shall be assignable by the Employee, his beneficiaries, or
legal representatives without the Company's prior written consent.
(b) BINDING AGREEMENT. This Agreement shall be binding upon, and
inure to the benefit of, the Employee and the Company and their respective
heirs, executor, administrators, successors and permitted assigns.
(c) AMENDMENT OF AGREEMENT. This Agreement may not be modified
or amended except by an instrument in writing signed by the parties hereto.
(d) WAIVER. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there by any estoppel against the
enforcement of any provision of this Agreement, except by writing instrument of
the party charged with such waiver or estoppel.
(e) SEVERABILITY. If, for any reason, any provision of this
Agreement is held invalid, such invalidity shall not effect any other provision
of this Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect.
(f) NOTICES. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified or registered mail, addressed to James J. Lynn, 5435 Wedgewood
Drive, Shorewood, MN 55331; if to the Company, addressed to In Home Health,
Inc., Carlson Center, Suite 550, 601 Lakeshore Parkway, Minnetonka, Minnesota
55305-5214 and directed to the attention of the Board with a copy to the
Secretary of the Company; or to such other address as either party any have
furnished to the other in writing in accordance herewith,
<PAGE>
-8-
except that notice of change of address shall be effective only upon receipt.
(g) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(h) INDULGENCES, ETC. Neither the failure nor any delay on the
part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence.
(i) HEADINGS. The headings of paragraphs herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
(j) GOVERNING LAW. This Agreement is governed by the laws of the
State of Minnesota, and its validity, interpretation, performance, and
enforcement shall be governed by the laws of the said State.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Employee has signed this
Agreement, all as of the day and year first above written.
EMPLOYEE IN HOME HEALTH, INC.
By:
- ------------------------------- ------------------------------------
James J. Lynn
Its:
------------------------------------
<PAGE>
EXHIBIT I
FORM OF OPINION OF LINDQUIST & VENNUM,
COUNSEL FOR THE SELLER
Opinion, dated the Closing Date and addressed to the Purchaser of
Lindquist & Vennum, counsel for the Seller, to the effect that:
1. The Seller has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Minnesota.
2. The authorized capital stock of the Seller is as set forth in the
Securities Purchase and Sale Agreement (the "Purchase Agreement"). All
outstanding shares of capital stock (including the Shares) of the Seller has
been duly authorized and have not been issued in violation of (nor are any of
the authorized shares of capital stock of the Seller subject to) any preemptive
or similar rights created by statute, the articles of incorporation or bylaws of
the Seller, or, to the best of such counsel's knowledge, any agreement to which
the Seller is a party or is bound.
3. The Warrant has been duly and validly authorized and when executed
by the Seller and delivered to and paid for by the Purchaser in accordance with
the terms of the Purchase Agreement, will constitute a valid and binding
agreement of the Seller enforceable in accordance with its terms, except that
the enforcement thereof may be subject to (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar laws now or hereafter
in effect relating to creditors' rights generally and (b) general principles of
equity and the discretion of the court before which any proceeding therefor may
be brought. The Warrant is free of preemptive or similar rights and any
Encumbrances (other than any Encumbrance created by federal or state securities
laws).
4. The Conversion Shares and the Warrant Shares (in sufficient amounts
to satisfy the initial conversion and exercise requirement of the Preferred
Stock and the Warrants) have been duly reserved for issuance upon conversion of
the Preferred Stock and exercise of the Warrants, as the case may be, and have
been duly authorized by the Seller, and, when issued and paid for (if required)
upon such exercise or conversion in accordance with the terms of the Preferred
Stock or the Warrants, as the case may be, will be validly issued, fully paid
and nonassessable, and such shares will be free of preemptive or similar rights
and Encumbrances (other than any Encumbrance created by federal or state
securities laws).
5. The Seller has taken all action required by law, its Articles of
Incorporation, its bylaws or otherwise required by
<PAGE>
law to be taken by it to authorize the execution, delivery and performance by it
of the Purchase Agreement and each other Transaction Document and in respect of
the Issuer Self-Tender. Each Transaction Document has been duly authorized,
executed and delivered by the Seller and each such document is a legal, valid
and binding agreement of the Seller, enforceable against the Seller in
accordance with its terms, except that the enforcement thereof may be subject to
(a) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
similar laws now or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity and the discretion of the court before
which any proceeding therefor may be brought.
6. The execution, delivery and performance of each Transaction Document
by the Seller and the consummation of the transactions contemplated therein to
be performed by the Seller, and the consummation of the Issuer Self-Tender, do
not and will not constitute or result in (a) a breach or violation of, or a
default under, the Articles of Incorporation or bylaws of the Seller, (b) a
breach or violation of, a default under or an event triggering any payment or
other obligation pursuant to, any Compensation and Benefit Plan known to such
counsel or, to the knowledge of such counsel, any grant or award made under any
of the foregoing, (c) except as set forth in Schedules 5.9 and 5.11 of the
Purchase Agreement, a breach, violation or event triggering a right of
termination of, or a default under, or the acceleration of or the creation of a
lien, pledge, security interest or other encumbrance on assets (with or without
the giving of notice or the lapse of time or both) pursuant to any provision of
any Contract of the Seller known to such counsel or any law, rule, ordinance or
regulation (other than the securities or Blue Sky laws of the various states of
the United States of America) or judgment, decree, order or award known to such
counsel to which the Seller is subject or any governmental or non-governmental
authorization, consent, approval, registration, franchise, license or permit
known to such counsel under which Seller conducts any of its business, or (d)
except as set forth in Schedules 5.9 and 5.11 of the Purchase Agreement, to the
knowledge of such counsel, any other change in the rights or obligations of any
party under any of the Seller's Contracts.
7. Except as set forth in Schedules 5.9 and 5.11 of the Purchase
Agreement, no Consent of or by any (a) court, (b) government agency or body or
(c) other third party (whether acting in individual, fiduciary or other
capacity) is required for the consummation of the transactions contemplated by
the Purchase Agreement and the other Transaction Documents, the Proxy Statement
or the Issuer Tender Offer Documents to be performed by the Seller, except (i)
such as have been obtained and made and are in full force and effect and (ii)
such as may be required under the Act and state securities laws in connection
with the
2
<PAGE>
performance by the Seller of its obligations under the Registration Rights
Agreement.
8. The Preferred Stock Designation setting forth the series, number of
shares in the series, dividend rate, redemption price, liquidation price,
conversion price and other rights and preferences of the Preferred Stock has
been duly adopted by the Board of Directors of the Seller and complies with all
requirements of the Minnesota BCA. The Preferred Stock Designation has been
duly filed with the Secretary of State of the State of Minnesota in accordance
with the requirements of the Minnesota BCA. When delivered to and paid for by
the Purchaser in accordance with the Purchase Agreement, the Preferred Stock
will be validly issued, fully paid and non-assessable and will be free of
preemptive or similar rights and Encumbrances and the holders of the Preferred
Stock will be entitled to all such rights, preferences and privileges as are set
forth in the Preferred Stock Designation.
9. The amendment (the "Articles Amendment") to the Articles of
Incorporation of the Seller has been duly and validly authorized and adopted by
all necessary corporate action and has been duly filed with the Secretary of
State of the State of Minnesota and the adoption of such amendment complies with
the requirements of the Minnesota BCA, the Articles of Incorporation and the
bylaws of the Seller and has the legal effect, together with the Preferred Stock
Designation, of entitling the holders of the Preferred Stock such voting rights
as are set forth in the Preferred Stock Designation.
10. The amendments to the bylaws of the Seller specified in the Purchase
Agreement have been duly and validly authorized and adopted by all necessary
corporate action and the adoption of such amendment complies with the
requirements of the Minnesota BCA and the bylaws of the Seller and, together
with the Articles Amendment and the Preferred Stock Designation, has the legal
effect of entitling each holder of shares of Preferred Stock to such number
votes as specified in the terms of the Preferred Stock of such series held by
such holder at any meeting of the shareholders.
11. The Seller is not subject to registration and regulations as an
"investment company" as such term is defined in the Investment Company Act of
1940, as amended.
12. Assuming the representations and warranties of the Seller set forth
in Section 5.25 of the Purchase Agreement and of the Purchaser set forth in
Section 6.3 of the Purchase Agreement are true and correct, the offer and sale
of the Securities made pursuant to the Purchase Agreement will be exempt from
the registration requirements of the Act.
3
<PAGE>
13. Neither the Purchase Agreement nor the Investment constitutes a
"takeover offer" within the meaning of Section 302A.011 (Subdivision 53) of the
Minnesota BCA.
14. A committee of disinterested directors (as defined in Section
302A.673 (Subdivision 1, paragraph (d)(d) of the Minnesota BCA (the "Committee")
has been duly formed, in accordance with the requirements of Section 302A.673
(Subdivision 1, paragraph (d)) and Section 302A.675 (Subdivision 2) of the
Minnesota BCA to evaluate the Purchase Agreement and the Investment, such
Committee has duly approved the Purchase Agreement and the Investment in
accordance with the Minnesota BCA prior to the date of the Agreement and such
approval satisfies the requirements of Section 302A.673 (Subdivision 1,
paragraph (d)) and Section 302A.675 (Subdivision 2) of the Minnesota BCA; and as
a result of such approval, the Seller shall not be subject to Section 302A.673
with respect to any transaction or series of transactions that constitute a
"business combination" within the meaning of Section 302A.011 (Subdivision 46)
of the Minnesota BCA between the Seller and the Purchaser, and even if either
the Purchase Agreement or the Investment were deemed by a court of competent
jurisdiction to constitute a "takeover offer" within the meaning of Section
302A.011 (Subdivision 53) of the Minnesota BCA, by virtue of the above described
actions of the Committee, any further acquisition of Common Stock by the
Purchaser after the Closing, including, but not limited to acquisitions made by
purchase, exchange, merger, consolidation, partial or complete liquidation,
redemption, reverse stock split, recapitalization, reorganization, or any other
similar transaction shall not be subject to Section 302A.675 of the Minnesota
BCA.
15. None of the Investment or the acquisition of any of the Conversion
Shares or the Warrant Shares upon conversion of the Preferred Stock or exercise
of the Warrants constitute or will constitute a "control share acquisition"
within the meaning of Section 302A.011 (Subdivision 38) of the Minnesota BCA for
purposes of Section 302A.671 of the Minnesota BCA and Section 302A.671 of the
Minnesota BCA is not applicable to either of the Investment or the acquisition
of any of the Conversion Shares or the Warrant Shares upon conversion of the
Preferred Stock or exercise of the Warrants. The Investment constitutes an
acquisition of shares of the Seller having voting power in the election of
directors of over fifty percent (50%) as contemplated by Section 302A.671
(Subdivision 2, paragraph (d)(3)) of the Minnesota BCA and, therefore, assuming
that the Purchaser does not sell or otherwise dispose of capital stock of the
Seller having voting power in the election of directors such that after such
sale or other disposition the Purchaser fails to own capital stock of the Seller
having voting power in the election of directors of over fifty percent, any
subsequent purchase by the Purchaser of shares of capital stock of the Seller
will not be subject to Section 302A.671 of the Minnesota BCA. However,
4
<PAGE>
assuming that the Investment or the acquisition of any of the Conversion Shares
or the Warrant Shares upon conversion of the Preferred Stock or exercise of the
Warrants were found by a court of competent jurisdiction to constitute a
"control share acquisition" or otherwise to be subject to the provisions of
Section 302A.671 of the Minnesota BCA, the shareholders of the Seller have duly
approved, in accordance with Section 302A.671 of the Minnesota BCA, the
Purchaser's acquisition of the shares of Preferred Stock and all shares of
Common Stock acquired pursuant to the Purchase Agreement, whether, in the case
of shares of Common Stock, such shares are acquired immediately at the Closing
or upon conversion of the Preferred Stock or exercise of the Warrants (including
any increase in the number of shares pursuant to the anti-dilution provisions
thereof), (i) in the case of the Preferred Stock, the voting rights set forth in
the Preferred Stock Designation and (ii) in the case of the Common Stock, the
same voting rights as all other shares of Common Stock, in each case as
contemplated by Section 302A.671 (Subdivision 4a, paragraph (a)) of the
Minnesota BCA and the legal effect of such approval shall be that such shares
shall have such voting rights and shall not be subject of redemption by the
Seller pursuant to Section 302A.671 (Subdivision 6) of the Minnesota BCA.
16. Each SEC Document, as of the date of its filing with the SEC,
complied as to form in all material respects with the requirements of the Act
and the Exchange Act.
17. On the date that the Proxy Statement was mailed to the Seller's
shareholders and on the date of the special meeting of the shareholders of the
Seller in connection therewith, the Proxy Statement and the Schedule 13E-4
complied as to form in all material respects with the requirements of the
Exchange Act.
Although such counsel cannot guarantee the accuracy or completeness of the
statements contained in the Proxy Statement or Schedule 13E-4, such counsel is
not aware of any facts which would lead it to believe that, on the date that the
Proxy Statement was mailed to the Seller's shareholders and on the date of the
special meeting of the shareholders of the Seller in connection therewith and on
the Closing Date, either the Proxy Statement or the Schedule 13E-4 contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading (it being understood that such counsel expresses no opinion or
assurance with respect to financial statements and other financial and
statistical information contained within the Proxy Statement and the Schedule
13E-4).
5
<PAGE>
EXHIBIT J
FORM OF OPINION OF COUNSEL FOR THE PURCHASER
Opinions, dated the Closing Date and addressed to the Seller of Cahill
Gordon & Reindel, counsel for the Purchaser, as to paragraphs (1), (2) and
(3)(a) below, and the General Counsel of Manor Care, Inc. as to paragraphs
(3)(b) and (4) below to the effect that:
1. The Purchaser has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation.
2. The Purchaser has taken all action required by law, its Certificate of
Incorporation, its bylaws or otherwise required to be taken by it to authorize
the execution, delivery and performance by it of the Purchase Agreement and each
other Transaction Document to which it is a party. Each Transaction Document to
which it is a party has been duly authorized, executed and delivered by the
Purchaser and each such document is a legal, valid and binding agreement of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
except that the enforcement thereof may be subject to (a) bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or similar laws now
or hereafter in effect relating to creditor's rights generally and (b) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought.
3. The execution, delivery and performance of each Transaction Document
by the Purchaser to which it is a party and the consummation of the transactions
contemplated therein to be performed by the Purchaser, do not and will not
constitute or result in a breach or violation of, or a default under, (a) the
Certificate of Incorporation or bylaws of the Purchaser, or (b) any law, rule,
ordinance or regulation (other than the securities or Blue Sky Laws of the
various states of the United States of America) or judgment, decree, order or
award to which the Purchaser is subject or any governmental or non-governmental
authorization, consent, approval, registration, franchise, license or permit
under which the Purchaser conducts any of its business.
4. No Consent of or with any (a) court, (b) government agency or body or
(c) other third party (whether acting in individual, fiduciary or other
capacity) is required for the consummation by the Purchaser of the transactions
contemplated by the Purchase Agreement and the other Transaction Documents to be
<PAGE>
performed by the Purchaser, except such as have been obtained and made and are
in full force and effect.
As to matters of enforceability set forth in paragraph (2) above, counsel
may assume that the laws of the State of Minnesota are identical to the laws of
the State of New York and may state that no opinion is given as to the laws of
the State of Minnesota.
<PAGE>
EXHIBIT K
As Amended through
2/18/92
RESTATED
BY-LAWS
OF
IN HOME HEALTH, INC.
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office of
the corporation shall be such as is designated by the Board of Directors from
time to time.
SECTION 2. REGISTERED OFFICE. The location and address of the registered
office of the corporation shall be such as is designated by the Board of
Directors or the President from time to time and certified to the Secretary of
State. The registered office need not be identical with the principal executive
office of the corporation and may be changed from time to time by the Board of
Directors.
SECTION 3. OTHER OFFICES. The corporation may have other offices at such
places within and without the State of Minnesota as the Board of Directors may
from time to time determine.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETING. All meetings of the shareholders of this
corporation shall be held at its principal executive office unless some other
place for any such meeting within or without the State of Minnesota be
designated by the
<PAGE>
Board of Directors in the notice of meeting. Any regular or special meeting of
the shareholders of the corporation called by or held pursuant to a written
demand of shareholders shall be held in the county where the principal executive
office is located.
SECTION 2. REGULAR MEETINGS. (a) Regular meetings of the shareholders of
this corporation may be held at the discretion of the Board of Directors on an
annual or less frequent periodic basis on such date and at such time and place
as may be designated by the Board of Directors in the notice of meeting. At
regular meetings the shareholders shall elect a Board of Directors and transact
such other business as may be appropriate for action by shareholders. If a
regular meeting of shareholders has not been held for a period of fifteen (15)
months, one or more shareholders holding not less than three percent (3%) of the
voting power of all shares of the corporation entitled to vote may call a
regular meeting of shareholders by delivering to the President or Treasurer a
written demand for a regular meeting. Within thirty (30) days after the receipt
of such written demand by the President or Treasurer, the Board of Directors
shall cause a regular meeting of shareholders to be called and held on notice no
later than ninety (90) days after the receipt of written demand, all at the
expense of the corporation.
(b) At a regular meeting, the shareholders shall elect directors of the
corporation and shall transact such other business as may properly come before
them. To be properly brought before the meeting, business must be of a nature
that is
2
<PAGE>
appropriate for consideration at a regular meeting and must be (i) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (ii) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (iii) otherwise properly
brought before the meeting by a shareholder. In addition to any other
applicable requirements, for business to be properly brought before a regular
meeting by a shareholder, the shareholder must have given timely notice thereof
in writing to the Secretary of the corporation. To be timely, each such notice
must be given, either by personal delivery or by United States mail, postage
prepaid, to the Secretary of the corporation, and received not later than the
close of business on the 10th day following the day on which such notice of the
date of the regular meeting was mailed or public disclosure of the meeting was
made, whichever first occurs. Each such notice to the Secretary shall set forth
as to each matter the shareholder proposes to bring before the regular meeting
(1) a brief description of the business desired to be brought before the meeting
and the reasons for conducting such business at the regular meeting, (2) the
name and address of record of the shareholder proposing such business, (3) the
class or series (if any) and number of shares of the corporation which are owned
by the shareholder, and (4) any material interest of the shareholder in such
business. Notwithstanding anything in these Bylaws to the contrary, no business
shall be transacted at the regular meeting except in
3
<PAGE>
accordance with the procedures set forth in this Article; PROVIDED, HOWEVER,
that nothing in this Article shall be deemed to preclude discussion by any
shareholder of any business properly brought before the regular meeting in
accordance with these Bylaws.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes appropriate for action by shareholders, may be called by
the President, by the Vice President in the absence of the President, by the
Treasurer, or by the Board of Directors or any two or more members thereof.
Such meeting shall be held on such date and at such time and place as shall be
fixed by the person or persons calling the meeting and designated in the notice
of meeting. Special meetings may also be called by one or more shareholders
holding not less than ten percent (10%) of the voting power of all shares of the
corporation entitled to vote by delivering to the President or Treasurer a
written demand for a special meeting, which demand shall contain the purposes of
the meeting; PROVIDED, HOWEVER, that a special meeting for the purpose of
considering any action to directly or indirectly facilitate a business
combination (as defined in the Minnesota Business Corporation Act), including
any action to change or otherwise affect the composition of the Board of
Directors for that purpose, must be called by twenty-five percent (25%) or more
of the voting power of all shares entitled to vote. Within thirty (30) days
after the receipt of a written demand for a special meeting of
4
<PAGE>
shareholders by the President or Treasurer, the Board of Directors shall cause a
special meeting of shareholders to be called and held on notice no later than
ninety (90) days after the receipt of such written demand, all at the expense of
the corporation. Business transacted at any special meeting of shareholders
shall be limited to the purpose or purposes stated in the notice of meeting.
Any business transacted at any special meeting of shareholders that is not
included among the stated purposes of such meeting shall be voidable by or on
behalf of the corporation unless all of the shareholders have waived notice of
the meeting.
SECTION 4. NOTICE OF MEETINGS. Except where a meeting of shareholders
is an adjourned meeting and the date, time, and place of such meeting were
announced at the time of adjournment, notice of all meetings of shareholders
stating the date, time, and place thereof, and any other information required by
law or desired by the Board of Directors or by such other person or persons
calling the meeting, and in the case of special meetings, the purpose thereof,
shall be given to each shareholder of record entitled to vote at such meeting
not less than three (3) nor more than sixty (60) days prior to the date of such
meeting. In the event that a plan of merger or the sale or other disposition of
all or substantially all of the assets of the corporation is to be considered at
a meeting of shareholders, notice of such meeting shall be given to every
shareholder, whether or not
5
<PAGE>
entitled to vote, not less than fourteen (14) days prior to the date of such
meeting.
Notices of meeting shall be given to each shareholder entitled thereto by
oral communication, by mailing a copy thereof to such shareholder at an address
he has designated or to the last known address of such shareholder, by handing a
copy thereof to such shareholder, or by any other delivery that conforms to law.
Notice by mail shall be deemed given when deposited in the United States mail
with sufficient postage affixed. Any shareholder may waive notice of any
meeting of shareholders. Waiver of notice shall be effective whether given
before, at, or after the meeting and whether given orally, in writing, or by
attendance. Attendance by a shareholder at a meeting is a waiver of notice of
that meeting, except where the shareholder objects at the beginning of the
meeting to the transaction of business because the meeting is not lawfully
called or convened and does not participate thereafter in the meeting, or
objects before a vote on an item of business because the item may not lawfully
be considered at that meeting and does not participate in the consideration of
that item at the meeting.
SECTION 5. RECORD DATE. For the purpose of determining shareholders
entitled to notice of and to vote at any meeting of shareholders or any
adjournment thereof, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors of the corporation may, but need not, fix
a
6
<PAGE>
date as the record date for any such determination of shareholders, which record
date, however, shall in no event be more than sixty (60) days prior to any such
intended action or meeting.
SECTION 6. QUORUM. The holders of a majority of the voting power of all
shares of the corporation entitled to vote at a meeting shall constitute a
quorum at a meeting of shareholders for the purpose of taking any action other
than adjourning such meeting. If the holders of a majority of the voting power
of all shares are not represented at a meeting, the shareholders present in
person or by proxy shall constitute a quorum for the sole purpose of adjourning
such meeting, and the holders of a majority of the shares so represented may
adjourn the meeting to such date, time, and place as they shall announce at the
time of adjournment. Any business may be transacted at the meeting held
pursuant to such an adjournment and at which a quorum shall be represented,
which might have been transacted at the adjourned meeting. If a quorum is
present when a duly called or held meeting is convened, the shareholders present
may continue to transact business until adjournment, even though the withdrawal
of a number of shareholders originally represented leaves less than the number
otherwise required for a quorum.
A meeting of the shareholders at which there is a quorum may be adjourned
as to all or part of the matters to be considered at the meeting upon motion by
the person presiding at such meeting and by a majority vote of shares
represented in person or by
7
<PAGE>
proxy at such meeting. Such adjournment shall be until a specific time and
place, and the time and place for the reconvened meeting shall be announced at
the meeting and reflected in the minutes thereof.
SECTION 7. VOTING AND PROXIES. At each meeting of the shareholders every
shareholder shall be entitled to one vote in person or by proxy for each share
of capital stock held by such shareholder, but no appointment of a proxy shall
be valid for any purpose more than eleven (11) months after the date of its
execution, unless a longer period is expressly provided in the appointment.
Every appointment of a proxy shall be in writing (which shall include
telegraphing, cabling, or telephotographic transmission), and shall be filed
with the Secretary of the corporation before or at the meeting at which the
appointment is to be effective. An appointment of a proxy for shares held
jointly by two or more shareholders shall be valid if signed by any one of them,
unless the Secretary of the corporation receives from any one of such
shareholders written notice either denying the authority of that person to
appoint a proxy or appointing a different proxy. All questions regarding the
qualification of voters, the validity of appointments of proxies, and the
acceptance or rejection of votes shall be decided by the presiding officer of
the meeting. The shareholders shall take action by the affirmative vote of the
holders of a majority of the voting power of the shares present, in person or
represented
8
<PAGE>
by proxy, and entitled to vote, except where a different vote is required by
law, the Articles of Incorporation, or these By-Laws.
SECTION 8. ACTION WITHOUT MEETING BY SHAREHOLDERS. Any action required
or permitted to be taken at a meeting of the shareholders may be taken without a
meeting by written action signed by all of the shareholders entitled to vote on
such action. Such written action shall be effective when signed by all of the
shareholders entitled to vote thereon or at such different effective time as is
provided in the written action.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed by or under the direction of its Board of Directors. The
directors may exercise all such powers and do all such things as may be
exercised or done by the corporation, subject to the provisions of applicable
law, the Articles of Incorporation, and these By-Laws.
SECTION 2. NUMBER, TENURE, AND QUALIFICATION. The number of directors
which shall constitute the whole Board of Directors shall be fixed from time to
time by resolution of the shareholders, subject to increase by resolution of the
Board of Directors. In the event that the shareholders fail to fix the number
of directors, the number of directors shall be the number provided for in the
Articles of Incorporation, subject to increase by resolution of the Board of
Directors. No decrease in the number of directors pursuant to this section
shall effect the
9
<PAGE>
removal of any director then in office except upon compliance with the
provisions of Section 7 of this Article. Each director shall be elected at a
regular meeting of shareholders, except as provided in Sections 6 and 7 of this
Article, and shall hold office until the next regular meeting of shareholders
and thereafter until his successor is duly elected and qualified, unless a prior
vacancy shall occur by reason of his death, resignation, or removal from office.
Directors shall be natural persons but need not be shareholders.
SECTION 3. MEETINGS. Meetings of the Board of Directors may be held at
such times and places as shall from time to time be determined by the Board of
Directors. Meetings of the Board of Directors also may be called by the
President, by the Vice President in the absence of the President, or by any
director, in which case the person or persons calling such meeting may fix the
date, time, and place thereof, either within or without the State of Minnesota,
and shall cause notice of meeting to be given.
SECTION 4. NOTICE OF MEETINGS. If the date, time, and place of a
meeting of the Board of Directors has been announced at a previous meeting, no
notice is required. In all other cases three (3) days' notice of meetings of
the Board of Directors, stating the date and time thereof and any other
information required by law or desired by the person or persons calling such
meeting, shall be given to each director. If notice of meeting is required, and
such notice does not state the place of the meeting, such meeting shall be held
at the principal executive
10
<PAGE>
office of the corporation. Notice of meetings of the Board of Directors shall
be given to directors in the manner provided in these By-Laws for giving notice
to shareholders of meetings of shareholders.
Any director may waive notice of any meeting. A waiver of notice by a
director is effective whether given before, at, or after the meeting, and
whether given orally, in writing, or by attendance. The attendance of a
director at any meeting shall constitute a waiver of notice of such meeting,
unless such director objects at the beginning of the meeting to the transaction
of business on grounds that the meeting is not lawfully called or convened and
does not participate thereafter in the meeting.
SECTION 5. QUORUM AND VOTING. A majority of the directors currently
holding office shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors. In the absence of a quorum, a majority of
the directors present may adjourn the meeting from time to time until a quorum
is present. If a quorum is present when a duly called or held meeting is
convened, the directors present may continue to transact business until
adjournment, even though the withdrawal of a number of directors originally
present leaves less than the number otherwise required for a quorum.
The Board of Directors shall take action by the affirmative vote of a
majority of the directors present at any duly held meeting, except as to any
question upon which any different vote
11
<PAGE>
is required by law, the Articles of Incorporation, or these By-Laws. A director
may give advance written consent or objection to a proposal to be acted upon at
a meeting of the Board of Directors. If the proposal acted on at the meeting is
substantially the same or has substantially the same effect as the proposal to
which the director has consented or objected, such consent or objection shall be
counted as a vote for or against the proposal and shall be recorded in the
minutes of the meeting. Such consent or objection shall not be considered, in
determining the existence of a quorum.
SECTION 6. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Any vacancy
occurring in the Board of Directors may be filled by the affirmative vote of a
majority of the directors remaining in office, even though said remaining
directors be less than a quorum. Any newly created directorship resulting from
an increase in the authorized number of directors by action of the Board of
Directors may be filled by a majority vote of the directors serving at the time
of such increase. Any vacancy or newly created directorship may be filled by
resolution of the shareholders. Unless a prior vacancy occurs by reason, of his
death, resignation, or removal from office, any director so elected shall hold
office until the next regular meeting of shareholders and until his successor is
duly elected and qualified.
SECTION 7. REMOVAL OF DIRECTORS. The entire Board of Directors or any director
or directors may be removed from
12
<PAGE>
office, with or without cause, at any special meeting of the shareholders, duly
called for that purpose as provided in these By-Laws, by a vote of the
shareholders holding a majority of the shares entitled to vote at an election of
directors. At such meeting, without further notice, the shareholders may fill
any vacancy or vacancies created by such removal as provided in Section 6 of
this Article. Any such vacancy not so filled may be filled by the directors as
provided in Section 6 of this Article. Any director named by the Board of
Directors to fill a vacancy may be removed at any time, with or without cause,
by an affirmative vote of a majority of the remaining directors, even though
said remaining directors be less than a quorum, if the shareholders have not
elected directors in the interval between the appointment to fill the vacancy
and the time of removal.
SECTION 8. COMMITTEES. The Board of Directors, by a resolution approved
by the affirmative vote of a majority of the directors then holding office, may
establish one or more committees of one or more persons having the authority of
the Board of Directors in the management of the business of the corporation to
the extent provided in such resolution. Such committees, however, shall at all
times be subject to the direction and control of the Board of Directors.
Committee members need not be directors and shall be appointed by the
affirmative vote of a majority of the directors present. A majority of the
members of any committee shall constitute a quorum for the transaction of
business at a meeting of any such committee. In other matters of
13
<PAGE>
procedure the provisions of these By-Laws shall apply to committees and the
members thereof to the same extent they apply to the Board of Directors and
directors, including, without limitation, the provisions with respect to
meetings and notice thereof, absent members, written actions, and valid acts.
Each committee shall keep regular minutes of its proceedings and report the same
to the Board of Directors.
SECTION 9. ACTION IN WRITING. Any action required or permitted to be
taken at a meeting of the Board of Directors or of a lawfully constituted
committee thereof may be taken by written action signed by all of the directors
then in office or by all of the members of such committee, as the case may be.
If the action does not require shareholder approval, such action shall be
effective if signed by the number of directors or members of such committee that
would be required to take the same action at a meeting at which all directors or
committee members were present. If any written action is taken by less than all
directors, all directors shall be notified immediately of its text and effective
date. The failure to provide such notice, however, shall not invalidate such
written action.
SECTION 10. MEETING BY MEANS OF ELECTRONIC COMMUNICATION. Members of
the Board of Directors of the corporation, or any committee designated by such
Board, may participate in a meeting of such Board or committee by means of
conference telephone or similar means of communication by which all persons
participating in the meeting can simultaneously hear each other, and
14
<PAGE>
participation in a meeting pursuant to this section shall constitute presence in
person at such meeting.
SECTION 11. NOMINATIONS TO THE BOARD OF DIRECTORS. Subject to the
rights, if any, of holders of any preferred stock, nominations for the election
of directors may be made by the Board of Directors or a committee appointed by
the Board of Directors or by any shareholder entitled to vote generally in the
election of directors. However, any shareholder entitled to vote generally in
the election of directors may nominate one or more persons for election as
directors at a regular or special meeting of shareholders only if written notice
of such shareholder's intent to make such nomination or nominations has been
given, either by personal delivery or by United States mail, postage prepaid, to
the Secretary of the corporation and received not later than the close of
business on the 10th day following the day on which notice of the date of the
meeting was mailed or public disclosure of the date of the meeting was made,
whichever first occurs. Each such notice to the Secretary shall set forth: (i)
the name and address of record of the shareholder who intends to make the
nomination; (ii) a representation that the shareholder is a holder of record of
shares of the corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (iii) the name, age, business and residence addresses, and
principal occupation or employment of each nominee; (iv) a description of all
arrangements or
15
<PAGE>
understandings between the shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; (v) such other information
regarding each nominee proposed by such shareholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission; and (vi) the consent of each nominee to
serve as a director of the corporation if so elected. The corporation may
require any proposed nominee to furnish such other information as may reasonably
be required by the corporation to determine the eligibility of such proposed
nominee to serve as a director of the corporation. The presiding officers of
the meeting may, if the facts warrant, determine that a nomination was not made
in accordance with the foregoing procedure, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER AND QUALIFICATION. The officers of the corporation
shall be elected by the Board of Directors and shall include a President, a
Secretary, and a Treasurer. The Board of Directors may also appoint one or more
Vice Presidents or such other officers and assistant officers as it may deem
necessary. Except as provided in these By-Laws, the Board of Directors shall
fix the powers, duties, and compensation of all officers. Officers may, but
need not, be directors of the corporation. Any number of offices may be held by
the same person.
16
<PAGE>
SECTION 2. TERM OF OFFICE. An officer shall hold office until his
successor shall have been duly elected, unless prior thereto he shall have
resigned or been removed from office as hereinafter provided.
SECTION 3. REMOVAL AND VACANCIES. Any officer or agent elected or
appointed by the Board of Directors shall hold office at the pleasure of the
Board of Directors and may be removed, with or without cause, at any time by the
vote of a majority of the Board of Directors. Any vacancy in an office of the
corporation shall be filled by the Board of Directors.
SECTION 4. PRESIDENT. The President shall be the chief executive officer
of the corporation, shall preside at all meetings of the shareholders and the
Board of Directors when present, shall have general and active management of the
business of the corporation, and shall see that all orders and resolutions of
the Board of Directors are carried into effect. He shall have the general
powers and duties usually vested in the office of the President and shall have
such other powers and perform such other duties as the Board of Directors may
from time to time prescribe.
SECTION 5. VICE PRESIDENTS. The Vice President, if any, or vice
Presidents in case there be more than one, shall have such powers and perform
such duties as the President or the Board of Directors may from time to time
prescribe. In the absence of the President or in the event of his death,
inability, or refusal to act, the Vice President, or in the event there be more
than one Vice President, the Vice Presidents in the order designated by
17
<PAGE>
the Board of Directors, or, in the absence of any designation, in the order of
their election, shall perform the duties of the President, and, when so acting,
shall have all the powers of and be subject to all of the restrictions upon the
President.
SECTION 6. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and of the shareholders and shall maintain records of, and
whenever necessary, certify all proceedings of the Board of Directors and of the
shareholders. He shall keep the stock books of the corporation, and, when so
directed by the Board of Directors or other person or persons authorized to call
such meetings, shall give or cause to be given notice of meetings of the
shareholders and of meetings of the Board of Directors. He shall also perform
such other duties and have such other powers as the President or the Board of
Directors may from time to time prescribe.
SECTION 7. TREASURER. The Treasurer shall be the chief financial officer
of the corporation. He shall have the care and custody of the corporate funds
and securities of the corporation and shall disburse the funds of the
corporation as may be ordered from time to time by the President or the Board of
Directors. He shall keep full and accurate financial records for the
corporation and shall have such other powers and perform such other duties as
the President or the Board of Directors may from time to time prescribe.
SECTION 8. OTHER OFFICERS. The Assistant Secretaries and Assistant
Treasurers in the order of their seniority, unless
18
<PAGE>
otherwise determined by the Board of Directors, shall, in the absence or
disability of the Secretary or Treasurer, perform the duties and exercise the
powers of the Secretary and Treasurer respectively. Such Assistant Secretaries
and Assistant Treasurers shall have such other powers and perform such other
duties as the President or the Board of Directors may from time to time
prescribe. Any other officers appointed by the Board of Directors shall hold
office at the pleasure of the Board of Directors and shall have such powers,
perform such duties, and be responsible to such other officers as the Board of
Directors may from time to time prescribe.
ARTICLE V
CERTIFICATES AND OWNERSHIP OF SHARES
SECTION 1. CERTIFICATES. All shares of the corporation shall be
represented by certificates. Each certificate shall contain on its face (a) the
name of the corporation, (b) a statement that the corporation is incorporated
under the laws of the State of Minnesota, (c) the name of the person to whom it
is issued, and (d) the number and class of shares, and the designation of the
series, if any, that the certificate represents. Certificates shall also
contain any other information required by law or desired by the Board of
Directors, and shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by either the President, a Vice
President, the Secretary, or an Assistant Secretary. If a certificate is signed
(1) by a transfer agent or an assistant
19
<PAGE>
transfer agent or (2) by a transfer clerk acting on behalf of the corporation
and a registrar, the signature of any such President, Vice President, Secretary,
or Assistant Secretary may be a facsimile. If a person signs or has a facsimile
signature placed upon a certificate while an officer, transfer agent, or
registrar of a corporation, the certificate may be issued by the corporation,
even if the person has ceased to have that capacity before the certificate is
issued, with the same effect as if the person had that capacity at the date of
its issue. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued with the number of shares and date of issue shall
be entered on the stock transfer books of the corporation. All certificates
surrendered to the corporation or the transfer agent for transfer shall be
canceled and no new certificate shall be issued until the former certificate for
a like number of shares shall have been surrendered and canceled, except that in
case of a lost, destroyed, or mutilated certificate, a new one may be issued
therefor upon such terms and indemnity to the corporation as the Board of
Directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of
20
<PAGE>
attorney duly executed and filed with the Secretary of the corporation, and on
surrender of such shares to the corporation or the transfer agent of the
corporation.
SECTION 3. OWNERSHIP. Except as otherwise provided in this Section, the
person in whose name shares stand on the books of the corporation shall be
deemed by the corporation to be the owner thereof for all purposes. The Board
of Directors, however, by a resolution approved by the affirmative vote of a
majority of directors then in office, may establish a procedure whereby a
shareholder may certify in writing to the corporation that all or a portion of
the shares registered in the name of the shareholder are held for the account of
one or more beneficial owners. Upon receipt by the corporation of the writing,
the persons specified as beneficial owners, rather than the actual shareholder,
shall be deemed the shareholders for such purposes as are permitted by the
resolution of the Board of Directors and are specified in the writing.
ARTICLE VI
CONTRACTS, LOANS, CHECKS, AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize such officers
or agents as they shall designate to enter into contracts or execute and deliver
instruments in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
SECTION 2. LOANS. The corporation shall not lend money to, guarantee the
obligation of, become a surety for, or otherwise
21
<PAGE>
financially assist any person unless the transaction, or class of transactions
to which the transaction belongs, has been approved by the affirmative vote of a
majority of directors present, and (a) is in the usual and regular course of
business of the corporation, (b) is with, or for the benefit of, a related
corporation, an organization in which the corporation has a financial interest,
an organization with which the corporation has a business relationship, or an
organization to which the corporation has the power to make donations, (c) is
with, or for the benefit of, an officer or other employee of the corporation or
a subsidiary, including an officer or employee who is a director of the
corporation or a subsidiary, and may reasonably be expected, in the judgment of
the Board of Directors, to benefit the corporation, or (d) has been approved by
the affirmative vote of the holders of two-thirds of the outstanding shares,
including both voting and nonvoting shares.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the corporation shall be signed by such officers or agents of the
corporation as shall be designated and in such manner as shall be determined
from time to time by resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks or other financial institutions as the Board of Directors may select.
22
<PAGE>
ARTICLE VII
MISCELLANEOUS
SECTION 1. DIVIDENDS. The Board of Directors may from time to time
declare, and the corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law.
SECTION 2. RESERVES. There may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from time
to time, in their absolute discretion, deem proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the corporation, or for the purchase of additional property, or
for such other purpose as the directors shall deem to be consistent with the
interests of the corporation, and the directors may modify or abolish any such
reserve.
SECTION 3. FISCAL YEAR. The fiscal year of the corporation shall be such
twelve-month period as may be set by a resolution of the Board of Directors,
provided, however, that the first fiscal year of the corporation may be a
shorter period if permitted by law and set by a resolution of the Board of
Directors.
SECTION 4. AMENDMENTS. Except as limited by the Articles of
Incorporation, these By-Laws may be altered or amended by the Board of Directors
at any meeting of directors to the full extent permitted by law, subject,
however, to the power of the shareholders of this corporation to alter or repeal
such By-Laws.
23
<PAGE>
* * * *
The undersigned, Secretary of In Home Health, Inc., a Minnesota corporation
does hereby certify that the foregoing are the Restated By-Laws of the
corporation incorporating all amendments to date.
Dated: February 19, 1992 /s/ Kenneth J. Figge
-----------------------------------
Kenneth J. Figge
Secretary
24
<PAGE>
EXHIBIT K-1
FORM OF AMENDMENT TO ARTICLE II,
SECTION 7 OF THE BYLAWS OF THE SELLER
The first sentence of Section 7 of Article II is deleted in its
entirety and in lieu thereof the following is inserted:
"At each meeting of the shareholders every holder of the Common
Stock shall be entitled to one vote in person or by proxy for each share
of Common Stock held by such shareholder and each holder of Preferred
Stock having the power to vote with the Common Stock shall be entitled to
such number of votes in person or by proxy as is specified pursuant to the
terms of such Preferred Stock for each share of such Preferred Stock held
by such shareholder, but no appointment of a proxy shall be valid for any
purpose more than eleven (11) months after the date of its execution,
unless a longer period is expressly provided in the appointment."
FORM OF AMENDMENT TO ARTICLE III,
SECTION 3 OF THE BYLAWS OF THE SELLER
The following shall be added to the end of Section 3 of Article III:
"The Chairperson of the Board of Directors shall preside at all
meetings of the Board of Directors when present."
FORM OF AMENDMENT TO ARTICLE IV,
SECTION 1 OF THE BYLAWS OF THE SELLER
The first sentence of Section 1 of Article IV is hereby amended by adding
the phrase "a Chief Executive Officer," after the word "include".
FORM OF AMENDMENT TO ARTICLE IV,
SECTION 4 OF THE BYLAWS OF THE SELLER
Section 4 of Article IV is hereby amended by the deletion thereof in its
entirety and in lieu thereof the following is inserted:
"SECTION 4. PRESIDENT. The President shall have such powers
and perform such duties as the Board of Directors may from time to time
prescribe. The President shall report to the Chief Executive Officer of
the corporation."
<PAGE>
-2-
FORM OF AMENDMENT TO ARTICLE IV,
SECTION 5 OF THE BYLAWS OF THE SELLER
Section 5 of Article IV is hereby amended by deleting from the first
sentence thereof the words "the President or".
FORM OF AMENDMENT TO ARTICLE IV,
SECTION 6 OF THE BYLAWS OF THE SELLER
Section 6 of Article IV is hereby amended by deleting from the last
sentence thereof the words "the President or".
FORM OF AMENDMENT TO ARTICLE IV,
SECTION 7 OF THE BYLAWS OF THE SELLER
Section 7 of Article IV is hereby amended by deleting from each of the
second sentence thereof and the last sentence thereof the words "the President
or".
FORM OF AMENDMENT TO ARTICLE IV,
SECTION 8 OF THE BYLAWS OF THE SELLER
Section 8 of Article IV is hereby amended by deleting from the second
sentence thereof the words "the President or".
FORM OF AMENDMENT TO ARTICLE IV OF THE
BYLAWS OF THE SELLER TO ADD A NEW SECTION 9
The following is hereby added to the end of Article IV:
"Section 9. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
shall preside at all meetings of the shareholders and shall see that all
orders and resolutions of the Board of Directors are carried into effect.
The Chief Executive Officer shall have such powers and perform such duties
as the Board of Directors may from time to time prescribe."
<PAGE>
EXHIBIT L
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of __________, 1995 by and between IN
HOME HEALTH INC., a Minnesota corporation (the "COMPANY"), and CATHY R. REEVES
(the "EMPLOYEE").
R E C I T A L S :
A. The Employee has been employed as a principal employee of the
Company and has made a unique contribution to the business of the Company.
B. The Board of Directors of the Company believes that the
continued services of Employee would be of great value to the Company and is
desirous of retaining her services as contemplated hereby.
C. The Employee desires to accept employment by the Company and
to render services to the Company, on the terms and subject to the conditions
provided in this Agreement.
A G R E E M E N T :
The parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ and retain
the Employee, and the Employee agrees to be employed and retained by the
Company, to render services to the Company for the period, at the rate of
compensation and upon the other terms and conditions set forth herein. The
Employee shall devote her best efforts and her entire working time and attention
to her employment by the Company.
2. TERM. The term of the Employee's employment under this
Agreement (the "EMPLOYMENT TERM") shall commence on the date hereof (the
"COMMENCEMENT DATE"), which is the date of consummation of the purchase by
Manor Healthcare Corp., a Delaware corporation (the "PURCHASER"), of
securities of the Company pursuant to the terms and subject to the conditions of
the Securities Purchase and Sale Agreement dated as of May 2, 1995 by and
between the Company and the Purchaser (the "SECURITIES PURCHASE AND SALE
AGREEMENT") and shall continue until the first anniversary of the date hereof
(such date being referred to herein as the "EXPIRATION DATE"), unless earlier
terminated as provided herein. The Company agrees that it will discuss an
extension of the Employment Term beyond the Expiration Date at least six months
prior to the Expiration
<PAGE>
-2-
Date; PROVIDED, HOWEVER, that the Company shall have no obligation hereunder
to so extend the Employment Term.
3. POSITION AND DUTIES.
(a) POSITION. The Employee shall serve the Company as an
officer employee. During her employment hereunder, the Employee shall report to
the appropriate senior executive officers of the Company.
(b) DUTIES. During the Employment Term, the Employee shall
serve the Company and its subsidiaries, if any, in an officer capacity with such
duties consistent therewith and shall perform such other services for the
Company and its subsidiaries, if any, consistent with her position as may be
assigned to her from time to time by the Company.
4. COMPENSATION AND REIMBURSEMENT OF EXPENSES.
(a) SALARY. For services rendered by the Employee under this
Agreement, the Company shall pay to the Employee as compensation during the
Employment Term a salary (the "SALARY") of $137,500 per annum until the
Expiration Date. The Salary shall be payable at least in monthly installments
on the normal payroll cycle of the Company, commencing with the end of the pay
period which next follows the commencement of the Employment Term. The Employee
will also be eligible to receive annual bonuses in accordance with the
management incentive compensation plan of the Company as described in Schedule
5.8(a) annexed to the Securities Purchase and Sale Agreement and consistent with
that of officers of the Company holding similar positions with comparable duties
and responsibilities.
(b) REIMBURSEMENT OF EXPENSES. Consistent with established
policies of the Company as in effect from time to time, the Company shall pay or
reimburse the Employee for all reasonable travel, hotel, entertainment and other
expenses incurred by the Employee in performing her obligations under this
Agreement and life insurance premiums not to exceed an amount per annum on life
insurance policies owned by the Employee consistent with that of officers of the
Company holding similar positions with comparable duties and responsibilities.
5. BENEFITS.
(a) BENEFIT PLANS. The Employee shall also be entitled to
participate, on a basis comparable to other officers of the Company holding
similar positions with comparable duties and responsibilities, in any benefit
plan or program of the Company for
<PAGE>
-3-
which such employees are or shall become eligible, including, without
limitation, pension, 401(k), life and disability insurance and stock benefits
and/or plans, subject, in the case of tax-qualified benefit plans and programs,
to restrictions under applicable law. The Employee shall be entitled, at her
own expense, to continue her participation in any group insurance plans after
the termination of her employment with the Company, to the extent required or
permitted under applicable law.
(b) PERSONAL TIME. The Employee shall be entitled to personal
time (inclusive of vacation time and sick leave) with compensation of 21 days of
personal time during the Employment Term. The Employee shall also be entitled
to all paid holidays given by the Company to its senior executive officers.
(c) NO REDUCTION. There shall be no material reduction or
diminution of the benefits provided in this Section 5 (i) unless the Employee
shall have given her prior written consent to such reduction or diminution and
an equitable arrangement (embodied in an ongoing substitute or alternative
benefit or plan) has been made with respect to such benefit or plan or (ii)
except, in the case of Section 5(a), for across-the-board benefit reductions
similarly affecting all senior management personnel of the Company.
(d) OPTIONS. Upon the execution of this Agreement, the Employee
shall be granted options (the "OPTIONS") to purchase 50,000 shares of Common
Stock under an amendment to the Company's 1995 Stock Option Plan approved by the
Company's stockholders (as so amended, the "1995 PLAN") which options (i) will
have an exercise price equal to the fair market value of the Common Stock on the
date of grant, (ii) will be immediately vested upon the grant thereof, (iii)
will be exercisable immediately and (iv) will have a term of ten years from the
date of grant and will expire on the tenth anniversary of the date of grant;
PROVIDED, HOWEVER, that anything herein to the contrary notwithstanding, the
Options shall expire within three months after the termination of the Employee's
employment on the terms and as provided in the 1995 Plan.
6. BENEFITS PAYABLE UPON DISABILITY.
(a) DISABILITY BENEFITS. Subject to Section 7(b) hereof, during
any period of Disability (as hereinafter defined) occurring during the
Employment Term, the Company shall continue to pay to the Employee the
compensation provided in Section 4 hereof and extend to her the benefits
provided in Sections 4 and 5 hereof; it being understood that if disability
benefits are provided under any disability policy maintained by the Company,
payments under such policy shall be credited against such obligations of the
Company. As used in this Agreement, the term "DISABILITY" shall
<PAGE>
-4-
mean the material inability of the Employee to render her agreed-upon services
to the Company due to physical and/or mental infirmity.
(b) SERVICES DURING DISABILITY. During the Employment Term,
notwithstanding any Disability, the Employee shall, to the extent that she is
physically and mentally able to do so, furnish information and assistance to the
Company, and, upon the reasonable request in writing of the Company, from time
to time, she shall make herself available to the Company to undertake reasonable
assignments consistent with her current position with the Company and her
physical and mental health.
7. EARLY TERMINATION. This Agreement is subject to termination
prior to the Expiration Date, as follows:
(a) DEATH OF THE EMPLOYEE. If the Employee dies, this Agreement
shall terminate effective as of the date of the Employee's death, and
thereupon the Employee's estate shall be entitled solely to the payments
and benefits set forth in Section 8(b) hereof.
(b) DISABILITY. If the Employee has been unable to perform her
obligations hereunder for six consecutive months, or for at least 180 days
during any calendar year, due to Disability, the Company shall thereafter
have the right to terminate the Employee's employment hereunder upon at
least 30 days' prior written notice to the Employee of the effective date
of such termination, and thereupon the Employee shall be entitled solely
to the payments and benefits set forth in Section 8(b) hereof.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company shall
have the right to terminate the Employee's employment hereunder for Cause
(as hereafter defined), and thereupon the Employee shall be entitled
solely to the payments and benefits set forth in Section 8(a) hereof. For
purposes of this Agreement, the term "CAUSE" shall mean any of the
following: (i) conviction of the Employee by a court of competent
jurisdiction for commission of any felony, (ii) the Employee's failure or
refusal to perform substantially her duties with the Company which failure
or refusal continues for thirty days following the Employee's receipt of
written notice specifying the nature and manner of such failure or refusal
to perform, (iii) the Employee's willful misconduct or gross negligence
which is injurious to the Company or its reputation and goodwill or (iv)
the Employee's breach of Section 9, 10, 11, 12 or 13 of this Agreement.
<PAGE>
-5-
(d) RESIGNATION OR RETIREMENT. If the Employee resigns or
retires, this Agreement shall terminate as of the date of the Employee's
resignation or retirement, and thereupon the Employee shall be entitled
solely to the payments and benefits set forth in Section 8(b), except
that, if the Employee's resignation or retirement is for any reason other
than Good Reason (as hereinafter defined), then, as of the date of the
Employee's resignation or retirement, the Employee shall be entitled
instead solely to the payments and benefits set forth in Section 8(a).
"GOOD REASON" shall mean any of the following: (i) a request that the
Employee permanently relocate to a location not in the Minneapolis,
Minnesota metropolitan area that the Employee rejects within 30 days of
the request and, upon such rejection, the relocation request not being
rescinded or (ii) a failure or refusal by the Company to provide duties
for the Employee to perform which are consistent with the position of an
officer of the Company which failure or refusal continues for thirty days
following the Company's receipt of written notice specifying the nature
and manner of such failure or refusal to perform.
8. EFFECT OF EARLY TERMINATION.
(a) CAUSE OR RESIGNATION OR RETIREMENT FOR OTHER THAN GOOD
Reason. Upon the early termination of this Agreement by the Company for Cause
or upon the resignation or retirement of the Employee for other than Good
Reason, the Company shall pay to the Employee (i) her Salary accrued through the
effective date of termination, payable at the time such payment is otherwise due
and payable hereunder, and (ii) all other amounts and benefits to which the
Employee is entitled, including, without limitation, vacation pay and expense
reimbursement amounts accrued to the effective date of termination and amounts
and benefits owing under the terms of any benefit plan of the Company in which
the Employee participates, and the Company and the Employee shall have no
further obligation to each other under this Agreement.
(b) OTHER TERMINATION. Upon the early termination of this
Agreement pursuant to Section 7(a), 7(b) or 7(d) (in the case of the resignation
or retirement of the Employee for Good Reason), the Company shall pay to the
Employee an amount equal to the remaining Salary which otherwise would have been
payable to the Employee until the Expiration Date (the "SEVERANCE AMOUNT")
plus all other amounts and benefits to which the Employee is entitled accrued to
the effective date of termination, including, without limitation, expense
reimbursement amounts and amounts and benefits owing under the terms of any
benefit plan of the Company in which the Employee participates. The Severance
Amount may be paid, at the option of the Company, (x) in monthly amounts of
Salary at the
<PAGE>
-6-
times such monthly amounts would otherwise have been due hereunder or (y) in a
lump sum equal to the net present value of the Severance Amount, determined by
discounting the aggregate Severance Amount using a discount rate equal to the
yield on the date of such termination of United States Treasury Securities
having a maturity closest to one year from such date. In the event that the
Company elects to pay the Severance Amount under clause (x) of the preceding
sentence, the Employee shall use good faith efforts to seek alternate employment
during the period on which the Severance Amount is based, and any remuneration
received by the Employee in connection therewith shall reduce the Severance
Amount dollar for dollar.
9. NON-SOLICITATION AGREEMENT. The Employee covenants and
agrees that while employed by the Company and for a period of one year
immediately following the effective date of any employment termination, the
Employee will not in any way, directly or indirectly, on the Employee's own
behalf or on behalf of or in conjunction with any other person, partnership,
firm or corporation, solicit, divert, take away, or attempt to take away any
person, partnership, firm or corporation (or the business or patronage) that has
been a customer of the Company or any of its affiliated entities. The Employee
further agrees that, for such period, the Employee will not in any way, directly
or indirectly, on the Employee's own behalf or on behalf of or in conjunction
with any person, partnership, firm or corporation, solicit, entice, hire, employ
or endeavor to employ any employee of the Company or any of its affiliated
entities.
10. AGREEMENT NOT TO COMPETE. The Employee covenants and agrees
that she will not, during the term of her employment with the Company, and, so
long as the Employee has been paid any payments due under Sections 4 and 8
above, following termination of such employment, during the greater of six
months or, if termination occurs during the Employment Term, the otherwise
remaining period of the Employment Term, either directly or indirectly, as an
employee, director, officer, shareholder, partner, advisor, consultant or
otherwise, engage in any commercial activity or participate in any venture of
any kind that competes with the Company with respect to the delivery of home
health care products and services within any area which constitutes a Restricted
Geographic Area at the date of such termination. "RESTRICTED GEOGRAPHIC AREA"
at any date means the areas which are within a fifty-mile radius of any city,
town or other population center in which, at such date, the Company operates a
professional home health care facility or liaison team.
Nothing stated in this Section 10 shall be deemed to preclude the
Employee from holding less than 5% of the outstanding
<PAGE>
-7-
capital stock of any corporation required to file periodic reports with the
Securities and Exchange Commission under Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, and the securities of which are listed on any
securities exchange or quoted on the Nasdaq National Market or traded on the
over-the-counter market.
The Employee acknowledges that the Company has expended substantial
time and expense in the research and development of processes, technology,
techniques and products which are unique to the Company or not generally known
to others and which could be unfairly taken or used by others in competition
with the Company. Accordingly, the Employee agrees that the restrictions
contained in this Agreement are reasonable.
If the scope of the restrictions contained in this Section 10 is too
broad to permit enforcement of such restrictions to their full extent, then such
restrictions shall be construed or re-written (blue-lined) so as to be
enforceable to the maximum extent permitted by law, and the Employee hereby
consents, to the extent she may lawfully do so, to the judicial modification of
the scope of such restrictions in any proceeding brought to enforce such
restrictions. In the event of any breach by the Employee of this Section 10,
the Company may elect to institute and prosecute proceedings in any state or
federal court located in the State of Minnesota, either at law or in equity, to
seek to obtain specific performance of any part of this Agreement, to seek
injunctive relief against the Employee to temporarily or permanently enjoin the
violation of this Section 10 and/or to seek to recover any damages resulting
from the breach of this Section 10, and to recover attorneys' fees and costs in
connection with the institution and prosecution of such proceedings. In any
such proceedings, the Employee shall be entitled to seek to recover her
attorneys' fees and costs in connection with such proceedings. No remedy
available to the Company for a breach of this Section 10 is intended to be
exclusive of any other remedy and all remedies are cumulative. The Employee
agrees that damages are not adequate to compensate the Company for any breach by
the Employee of this Agreement and hereby waives the defense of an adequate
remedy at law or any other remedy at law and admits and concedes that there are
none.
11. CONFIDENTIAL INFORMATION. The Employee covenants and agrees
not to at any time use, divulge, furnish or make accessible to anyone other than
the Company, its affiliated entities, or its or their directors and officers,
any proprietary or confidential information ("CONFIDENTIAL INFORMATION") of
the Company or any of its affiliated entitles, including but not limited to
information regarding the development of the Company's
<PAGE>
-8-
products, or the provision of the Company's services, or the Company's customer
lists.
Upon termination of her employment with the Company, the Employee
agrees to deliver to the Company all written materials that constitute
Confidential Information. Further, upon termination of her employment with the
Company, the Employee agrees to make available to any person designated by the
Company all information concerning pending or preceding transactions which may
affect the operation of the Company or any subsidiary of the Company about
which the Employee has knowledge. The obligations of the Employee contained in
this paragraph are in addition to the obligation of the Employee to return to
the Company, upon the termination of her employment, all property of the Company
then in her possession.
12. ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS. The Employee
shall promptly disclose to the Company all inventions, discoveries,
improvements, designs, processes, techniques, equipment, trademarks or
copyrightable matter conceived or made by the Employee during the Employee's
employment and related to any aspect of the business of the Company, and the
Employee hereby assigns all of the Employee's interest therein, including the
goodwill of the business symbolized by any trademarks, to the Company. The
Employee further agrees to execute any applications, assignments or other
instruments which the Company shall deem necessary to obtain letters patent,
trademark registration or copyright registration of the United States or any
foreign country or to otherwise protect the Company's interest therein. Nothing
contained in this provision shall apply to any invention for which no equipment,
supplies, facility or trade secrets information of the Company or any affiliated
entity of the Company was used and which was developed entirely on the
Employee's own time, and (a) which does not relate (1) to any aspect of the
business of the Company or any affiliated entity of the Company or (2) to the
actual or demonstrably anticipated research or development of the Company or any
affiliated entity of the Company, or (b) which does not result from any work
performed by the Employee for the Company or any affiliated entity of the
Company.
13. ASSISTANCE IN LITIGATION. During the Employment Term, the
Employee shall, upon reasonable notice, furnish such information and proper
assistance to the Company as may reasonably be required by the Company in
connection with any litigation in which it is, or may become, a party.
14. FEDERAL INCOME TAX WITHHOLDING. The Company shall withhold
from any benefits payable pursuant to this Agreement such
<PAGE>
-9-
Federal, State, City or other taxes as may be required to be withheld pursuant
to any law or governmental regulations or ruling.
15. EFFECT OF PRIOR AGREEMENTS. This Agreement contains the
entire understanding between the parties hereto respecting the Employee's
employment by the Company and supersedes any prior employment agreement or
arrangement between the Company and the Employee.
16. GENERAL PROVISIONS.
(a) NONASSIGNABILITY. Neither this Agreement nor any right or
interest hereunder shall be assignable by the Employee, her beneficiaries, or
legal representatives without the Company's prior written consent.
(b) BINDING AGREEMENT. This Agreement shall be binding upon,
and inure to the benefit of, the Employee and the Company and their respective
heirs, executors, administrators, successors and permitted assigns.
(c) AMENDMENT OF AGREEMENT. This Agreement may not be modified
or amended except by an instrument in writing signed by the parties hereto.
(d) WAIVER. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by written instrument of
the party charged with such waiver or estoppel.
(e) SEVERABILITY. If, for any reason, any provision of this
Agreement is held invalid, such invalidity shall not affect any other provision
of this Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect.
(f) NOTICES. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified or registered mail, return receipt requested, postage prepaid,
if to the Employee, addressed to Cathy R. Reeves, 16100 45th Avenue N.,
Plymouth, Minnesota 55446; if to the Company, addressed to In Home Health, Inc.,
Carlson Center, Suite 500, 601 Lakeshore Parkway, Minnetonka, Minnesota
55305-5214 and directed to the attention of the chief executive officer of the
Company with a copy to the secretary of the Company; or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except
<PAGE>
-10-
that notice of change of address shall be effective only upon receipt.
(g) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(h) INDULGENCES, ETC. Neither the failure nor any delay on the
part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence.
(i) HEADINGS. The headings of paragraphs herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
(j) GOVERNING LAW. This Agreement is governed by the laws of
the State of Minnesota, and its validity, interpretation, performance, and
enforcement shall be governed by the laws of said State.
<PAGE>
-11-
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Employee has signed this
Agreement, all as of the day and year first above written.
IN HOME HEALTH, INC.
By:
------------------------------------
Name:
Title:
-----------------------------------
Cathy R. Reeves
<PAGE>
EXHIBIT M
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of __________, 1995 by and between IN
HOME HEALTH INC., a Minnesota corporation (the "COMPANY"), and MARGARET L.
MAXON (the "EMPLOYEE").
R E C I T A L S :
A. The Employee has been employed as a principal employee of the
Company and has made a unique contribution to the business of the Company.
B. The Board of Directors of the Company believes that the
continued services of Employee would be of great value to the Company and is
desirous of retaining her services as contemplated hereby.
C. The Employee desires to accept employment by the Company and
to render services to the Company, on the terms and subject to the conditions
provided in this Agreement.
A G R E E M E N T :
The parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ and retain
the Employee, and the Employee agrees to be employed and retained by the
Company, to render services to the Company for the period, at the rate of
compensation and upon the other terms and conditions set forth herein. The
Employee shall devote her best efforts and her entire working time and attention
to her employment by the Company.
2. TERM. The term of the Employee's employment under this
Agreement (the "EMPLOYMENT TERM") shall commence on the date hereof (the
"COMMENCEMENT DATE"), which is the date of consummation of the purchase by
Manor Healthcare Corp., a Delaware corporation (the "PURCHASER"), of
securities of the Company pursuant to the terms and subject to the conditions of
the Securities Purchase and Sale Agreement dated as of May 2, 1995 by and
between the Company and the Purchaser (the "SECURITIES PURCHASE AND SALE
Agreement") and shall continue until the first anniversary of the date hereof
(such date being referred to herein as the "EXPIRATION DATE"), unless earlier
terminated as provided herein. The Company agrees that it will discuss an
extension of the Employment Term beyond the Expiration Date at least six months
prior to the Expiration
<PAGE>
-2-
Date; PROVIDED, HOWEVER, that the Company shall have no obligation hereunder
to so extend the Employment Term.
3. POSITION AND DUTIES.
(a) POSITION. The Employee shall serve the Company as an
officer employee. During her employment hereunder, the Employee shall report to
the appropriate senior executive officers of the Company.
(b) DUTIES. During the Employment Term, the Employee shall
serve the Company and its subsidiaries, if any, in an officer capacity with such
duties consistent therewith and shall perform such other services for the
Company and its subsidiaries, if any, consistent with her position as may be
assigned to her from time to time by the Company.
4. COMPENSATION AND REIMBURSEMENT OF EXPENSES.
(a) SALARY. For services rendered by the Employee under this
Agreement, the Company shall pay to the Employee as compensation during the
Employment Term a salary (the "SALARY") of $129,250 per annum until the
Expiration Date. The Salary shall be payable at least in monthly installments
on the normal payroll cycle of the Company, commencing with the end of the pay
period which next follows the commencement of the Employment Term. The Employee
will also be eligible to receive annual bonuses in accordance with the
management incentive compensation plan of the Company as described in Schedule
5.8(a) annexed to the Securities Purchase and Sale Agreement and consistent with
that of officers of the Company holding similar positions with comparable duties
and responsibilities.
(b) REIMBURSEMENT OF EXPENSES. Consistent with established
policies of the Company as in effect from time to time, the Company shall pay or
reimburse the Employee for all reasonable travel, hotel, entertainment and other
expenses incurred by the Employee in performing her obligations under this
Agreement and life insurance premiums not to exceed an amount per annum on life
insurance policies owned by the Employee consistent with that of officers of the
Company holding similar positions with comparable duties and responsibilities.
5. BENEFITS.
(a) BENEFIT PLANS. The Employee shall also be entitled to
participate, on a basis comparable to other officers of the Company holding
similar positions with comparable duties and responsibilities, in any benefit
plan or program of the Company for
<PAGE>
-3-
which such employees are or shall become eligible, including, without
limitation, pension, 401(k), life and disability insurance and stock benefits
and/or plans, subject, in the case of tax-qualified benefit plans and programs,
to restrictions under applicable law. The Employee shall be entitled, at her
own expense, to continue her participation in any group insurance plans after
the termination of her employment with the Company, to the extent required or
permitted under applicable law.
(b) PERSONAL TIME. The Employee shall be entitled to personal
time (inclusive of vacation time and sick leave) with compensation of 15 days of
personal time during the Employment Term. The Employee shall also be entitled
to all paid holidays given by the Company to its senior executive officers.
(c) NO REDUCTION. There shall be no material reduction or
diminution of the benefits provided in this Section 5 (i) unless the Employee
shall have given her prior written consent to such reduction or diminution and
an equitable arrangement (embodied in an ongoing substitute or alternative
benefit or plan) has been made with respect to such benefit or plan or (ii)
except, in the case of Section 5(a), for across-the-board benefit reductions
similarly affecting all senior management personnel of the Company.
(d) OPTIONS. Upon the execution of this Agreement, the Employee
shall be granted options (the "OPTIONS") to purchase 50,000 shares of Common
Stock under an amendment to the Company's 1995 Stock Option Plan approved by the
Company's stockholders (as so amended, the "1995 PLAN") which options (i) will
have an exercise price equal to the fair market value of the Common Stock on the
date of grant, (ii) will be immediately vested upon the grant thereof, (iii)
will be exercisable immediately and (iv) will have a term of ten years from the
date of grant and will expire on the tenth anniversary of the date of grant;
PROVIDED, HOWEVER, that anything herein to the contrary notwithstanding, the
Options shall expire within three months after the termination of the Employee's
employment on the terms and as provided in the 1995 Plan.
6. BENEFITS PAYABLE UPON DISABILITY.
(a) DISABILITY BENEFITS. Subject to Section 7(b) hereof, during
any period of Disability (as hereinafter defined) occurring during the
Employment Term, the Company shall continue to pay to the Employee the
compensation provided in Section 4 hereof and extend to her the benefits
provided in Sections 4 and 5 hereof; it being understood that if disability
benefits are provided under any disability policy maintained by the Company,
payments under such policy shall be credited against such obligations of the
Company. As used in this Agreement, the term "DISABILITY" shall
<PAGE>
-4-
mean the material inability of the Employee to render her agreed-upon services
to the Company due to physical and/or mental infirmity.
(b) SERVICES DURING DISABILITY. During the Employment Term,
notwithstanding any Disability, the Employee shall, to the extent that she is
physically and mentally able to do so, furnish information and assistance to the
Company, and, upon the reasonable request in writing of the Company, from time
to time, she shall make herself available to the Company to undertake reasonable
assignments consistent with her current position with the Company and her
physical and mental health.
7. EARLY TERMINATION. This Agreement is subject to termination
prior to the Expiration Date, as follows:
(a) DEATH OF THE EMPLOYEE. If the Employee dies, this Agreement
shall terminate effective as of the date of the Employee's death, and
thereupon the Employee's estate shall be entitled solely to the payments
and benefits set forth in Section 8(b) hereof.
(b) DISABILITY. If the Employee has been unable to perform her
obligations hereunder for six consecutive months, or for at least 180 days
during any calendar year, due to Disability, the Company shall thereafter
have the right to terminate the Employee's employment hereunder upon at
least 30 days' prior written notice to the Employee of the effective date
of such termination, and thereupon the Employee shall be entitled solely
to the payments and benefits set forth in Section 8(b) hereof.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company shall
have the right to terminate the Employee's employment hereunder for Cause
(as hereafter defined), and thereupon the Employee shall be entitled
solely to the payments and benefits set forth in Section 8(a) hereof. For
purposes of this Agreement, the term "CAUSE" shall mean any of the
following: (i) conviction of the Employee by a court of competent
jurisdiction for commission of any felony, (ii) the Employee's failure or
refusal to perform substantially her duties with the Company which failure
or refusal continues for thirty days following the Employee's receipt of
written notice specifying the nature and manner of such failure or refusal
to perform, (iii) the Employee's willful misconduct or gross negligence
which is injurious to the Company or its reputation and goodwill or (iv)
the Employee's breach of Section 9, 10, 11, 12 or 13 of this Agreement.
<PAGE>
-5-
(d) RESIGNATION OR RETIREMENT. If the Employee resigns or
retires, this Agreement shall terminate as of the date of the Employee's
resignation or retirement, and thereupon the Employee shall be entitled
solely to the payments and benefits set forth in Section 8(b), except
that, if the Employee's resignation or retirement is for any reason other
than Good Reason (as hereinafter defined), then, as of the date of the
Employee's resignation or retirement, the Employee shall be entitled
instead solely to the payments and benefits set forth in Section 8(a).
"GOOD REASON" shall mean any of the following: (i) a request that the
Employee permanently relocate to a location not in the Minneapolis,
Minnesota metropolitan area that the Employee rejects within 30 days of
the request and, upon such rejection, the relocation request not being
rescinded or (ii) a failure or refusal by the Company to provide duties
for the Employee to perform which are consistent with the position of an
officer of the Company which failure or refusal continues for thirty days
following the Company's receipt of written notice specifying the nature
and manner of such failure or refusal to perform.
8. EFFECT OF EARLY TERMINATION.
(a) CAUSE OR RESIGNATION OR RETIREMENT FOR OTHER THAN GOOD
Reason. Upon the early termination of this Agreement by the Company for Cause
or upon the resignation or retirement of the Employee for other than Good
Reason, the Company shall pay to the Employee (i) her Salary accrued through the
effective date of termination, payable at the time such payment is otherwise due
and payable hereunder, and (ii) all other amounts and benefits to which the
Employee is entitled, including, without limitation, vacation pay and expense
reimbursement amounts accrued to the effective date of termination and amounts
and benefits owing under the terms of any benefit plan of the Company in which
the Employee participates, and the Company and the Employee shall have no
further obligation to each other under this Agreement.
(b) OTHER TERMINATION. Upon the early termination of this
Agreement pursuant to Section 7(a), 7(b) or 7(d) (in the case of the resignation
or retirement of the Employee for Good Reason), the Company shall pay to the
Employee an amount equal to the remaining Salary which otherwise would have been
payable to the Employee until the Expiration Date (the "SEVERANCE AMOUNT")
plus all other amounts and benefits to which the Employee is entitled accrued to
the effective date of termination, including, without limitation, expense
reimbursement amounts and amounts and benefits owing under the terms of any
benefit plan of the Company in which the Employee participates. The Severance
Amount may be paid, at the option of the Company, (x) in monthly amounts of
Salary at the
<PAGE>
-6-
times such monthly amounts would otherwise have been due hereunder or (y) in a
lump sum equal to the net present value of the Severance Amount, determined by
discounting the aggregate Severance Amount using a discount rate equal to the
yield on the date of such termination of United States Treasury Securities
having a maturity closest to one year from such date. In the event that the
Company elects to pay the Severance Amount under clause (x) of the preceding
sentence, the Employee shall use good faith efforts to seek alternate employment
during the period on which the Severance Amount is based, and any remuneration
received by the Employee in connection therewith shall reduce the Severance
Amount dollar for dollar.
9. NON-SOLICITATION AGREEMENT. The Employee covenants and
agrees that while employed by the Company and for a period of one year
immediately following the effective date of any employment termination, the
Employee will not in any way, directly or indirectly, on the Employee's own
behalf or on behalf of or in conjunction with any other person, partnership,
firm or corporation, solicit, divert, take away, or attempt to take away any
person, partnership, firm or corporation (or the business or patronage) that has
been a customer of the Company or any of its affiliated entities. The Employee
further agrees that, for such period, the Employee will not in any way, directly
or indirectly, on the Employee's own behalf or on behalf of or in conjunction
with any person, partnership, firm or corporation, solicit, entice, hire, employ
or endeavor to employ any employee of the Company or any of its affiliated
entities.
10. AGREEMENT NOT TO COMPETE. The Employee covenants and agrees
that she will not, during the term of her employment with the Company, and, so
long as the Employee has been paid any payments due under Sections 4 and 8
above, following termination of such employment, during the greater of six
months or, if termination occurs during the Employment Term, the otherwise
remaining period of the Employment Term, either directly or indirectly, as an
employee, director, officer, shareholder, partner, advisor, consultant or
otherwise, engage in any commercial activity or participate in any venture of
any kind that competes with the Company with respect to the delivery of home
health care products and services within any area which constitutes a Restricted
Geographic Area at the date of such termination. "RESTRICTED GEOGRAPHIC AREA"
at any date means the areas which are within a fifty-mile radius of any city,
town or other population center in which, at such date, the Company operates a
professional home health care facility or liaison team.
Nothing stated in this Section 10 shall be deemed to preclude the
Employee from holding less than 5% of the outstanding
<PAGE>
-7-
capital stock of any corporation required to file periodic reports with the
Securities and Exchange Commission under Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, and the securities of which are listed on any
securities exchange or quoted on the Nasdaq National Market or traded on the
over-the-counter market.
The Employee acknowledges that the Company has expended substantial
time and expense in the research and development of processes, technology,
techniques and products which are unique to the Company or not generally known
to others and which could be unfairly taken or used by others in competition
with the Company. Accordingly, the Employee agrees that the restrictions
contained in this Agreement are reasonable.
If the scope of the restrictions contained in this Section 10 is too
broad to permit enforcement of such restrictions to their full extent, then such
restrictions shall be construed or re-written (blue-lined) so as to be
enforceable to the maximum extent permitted by law, and the Employee hereby
consents, to the extent she may lawfully do so, to the judicial modification of
the scope of such restrictions in any proceeding brought to enforce such
restrictions. In the event of any breach by the Employee of this Section 10,
the Company may elect to institute and prosecute proceedings in any state or
federal court located in the State of Minnesota, either at law or in equity, to
seek to obtain specific performance of any part of this Agreement, to seek
injunctive relief against the Employee to temporarily or permanently enjoin the
violation of this Section 10 and/or to seek to recover any damages resulting
from the breach of this Section 10, and to recover attorneys' fees and costs in
connection with the institution and prosecution of such proceedings. In any
such proceedings, the Employee shall be entitled to seek to recover her
attorneys' fees and costs in connection with such proceedings. No remedy
available to the Company for a breach of this Section 10 is intended to be
exclusive of any other remedy and all remedies are cumulative. The Employee
agrees that damages are not adequate to compensate the Company for any breach by
the Employee of this Agreement and hereby waives the defense of an adequate
remedy at law or any other remedy at law and admits and concedes that there are
none.
11. CONFIDENTIAL INFORMATION. The Employee covenants and agrees
not to at any time use, divulge, furnish or make accessible to anyone other than
the Company, its affiliated entities, or its or their directors and officers,
any proprietary or confidential information ("CONFIDENTIAL INFORMATION") of
the Company or any of its affiliated entitles, including but not limited to
information regarding the development of the Company's
<PAGE>
-8-
products, or the provision of the Company's services, or the Company's customer
lists.
Upon termination of her employment with the Company, the Employee
agrees to deliver to the Company all written materials that constitute
Confidential Information. Further, upon termination of her employment with the
Company, the Employee agrees to make available to any person designated by the
Company all information concerning pending or preceding transactions which may
affect the operation of the Company or any subsidiary of the Company about which
the Employee has knowledge. The obligations of the Employee contained in this
paragraph are in addition to the obligation of the Employee to return to the
Company, upon the termination of her employment, all property of the Company
then in her possession.
12. ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS. The Employee
shall promptly disclose to the Company all inventions, discoveries,
improvements, designs, processes, techniques, equipment, trademarks or
copyrightable matter conceived or made by the Employee during the Employee's
employment and related to any aspect of the business of the Company, and the
Employee hereby assigns all of the Employee's interest therein, including the
goodwill of the business symbolized by any trademarks, to the Company. The
Employee further agrees to execute any applications, assignments or other
instruments which the Company shall deem necessary to obtain letters patent,
trademark registration or copyright registration of the United States or any
foreign country or to otherwise protect the Company's interest therein. Nothing
contained in this provision shall apply to any invention for which no equipment,
supplies, facility or trade secrets information of the Company or any affiliated
entity of the Company was used and which was developed entirely on the
Employee's own time, and (a) which does not relate (1) to any aspect of the
business of the Company or any affiliated entity of the Company or (2) to the
actual or demonstrably anticipated research or development of the Company or any
affiliated entity of the Company, or (b) which does not result from any work
performed by the Employee for the Company or any affiliated entity of the
Company.
13. ASSISTANCE IN LITIGATION. During the Employment Term, the
Employee shall, upon reasonable notice, furnish such information and proper
assistance to the Company as may reasonably be required by the Company in
connection with any litigation in which it is, or may become, a party.
14. FEDERAL INCOME TAX WITHHOLDING. The Company shall withhold
from any benefits payable pursuant to this Agreement such
<PAGE>
-9-
Federal, State, City or other taxes as may be required to be withheld pursuant
to any law or governmental regulations or ruling.
15. EFFECT OF PRIOR AGREEMENTS. This Agreement contains the
entire understanding between the parties hereto respecting the Employee's
employment by the Company and supersedes any prior employment agreement or
arrangement between the Company and the Employee.
16. GENERAL PROVISIONS.
(a) NONASSIGNABILITY. Neither this Agreement nor any right or
interest hereunder shall be assignable by the Employee, her beneficiaries, or
legal representatives without the Company's prior written consent.
(b) BINDING AGREEMENT. This Agreement shall be binding upon,
and inure to the benefit of, the Employee and the Company and their respective
heirs, executors, administrators, successors and permitted assigns.
(c) AMENDMENT OF AGREEMENT. This Agreement may not be modified
or amended except by an instrument in writing signed by the parties hereto.
(d) WAIVER. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by written instrument of
the party charged with such waiver or estoppel.
(e) SEVERABILITY. If, for any reason, any provision of this
Agreement is held invalid, such invalidity shall not affect any other provision
of this Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect.
(f) NOTICES. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified or registered mail, return receipt requested, postage prepaid,
if to the Employee, addressed to Margaret L. Maxon, 5849 Dufferin Drive, Savage,
Minnesota 55378; if to the Company, addressed to In Home Health, Inc., Carlson
Center, Suite 500, 601 Lakeshore Parkway, Minnetonka, Minnesota 55305-5214 and
directed to the attention of the chief executive officer of the Company with a
copy to the secretary of the Company; or to such other address as either party
may have furnished to the other in writing in accordance herewith, except
<PAGE>
-10-
that notice of change of address shall be effective only upon receipt.
(g) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(h) INDULGENCES, ETC. Neither the failure nor any delay on the
part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence.
(i) HEADINGS. The headings of paragraphs herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
(j) GOVERNING LAW. This Agreement is governed by the laws of
the State of Minnesota, and its validity, interpretation, performance, and
enforcement shall be governed by the laws of said State.
<PAGE>
-11-
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Employee has signed this
Agreement, all as of the day and year first above written.
IN HOME HEALTH, INC.
By:
------------------------------------
Name:
Title:
------------------------------------
Margaret L. Maxon
